Question
11 Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $534,000 or a new model 240 machine costing $422,000
11
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $534,000 or a new model 240 machine costing $422,000 to replace a machine that was purchased 5 years ago for $473,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired. |
Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A. |
Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $422,000 in the new machine, the money could be invested in a project that would return a total of $469,000. |
In making the decision to buy the model 240 machine rather than the model 370 machine, the sunk cost was: |
a)$473,000
b)$422,000
c)$469,000
d)$534,000
12
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $502,000 or a new model 240 machine costing $443,000 to replace a machine that was purchased 11 years ago for $470,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired. |
Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A. |
Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $443,000 in the new machine, the money could be invested in a project that would return a total of $487,000. |
In making the decision to invest in the model 240 machine, the opportunity cost was: |
a)$502,000
b)$443,000
c)$487,000
d)$470,000
Lettman Corporation has provided the following partial listing of costs incurred during November:
Marketing salaries | $ | 52,100 |
Property taxes, factory | $ | 12,400 |
Administrative travel | $ | 100,800 |
Sales commissions | $ | 52,800 |
Indirect labor | $ | 38,400 |
Direct materials | $ | 173,900 |
Advertising | $ | 139,900 |
Depreciation of production equipment | $ | 39,100 |
Direct labor | $ | 87,400 |
|
Required:
a. | What is the total amount of product cost listed above? |
Total product cost | $ |
b. | What is the total amount of period cost listed above? |
Total period cost | $ |
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