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4. A business is operating at 70% of capacity and is currently purchasing a part used in its tnanacturing operations for $24 per unit. The
4. A business is operating at 70% of capacity and is currently purchasing a part used in its tnanacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $28, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a. $60,000 cost decrease b. $180,000 cost increase c. $60,000 cost increase d. $180,000 cost decrease The amount of income that would result from an alternative use of cash is called: a. differential income b. sunk cost c. differential revenue d. opportunity cost 5. 6. Pheasant Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $60 per pound and would require an additional cost of $24 per pound to produce. What is the differential cost of producing Product C? $30 per pound a. b. c. d. $24 per pound $28 per pound $60 per pound Partridge Co. can further process Product 3 to produce Product D. Product J is currently selling for $21 per pound and costs $15.75 per pound to produce. Product D would sell for $38 per pound and would require an additional cost of $9.25 per pound to produce. 7. What is the differential cost of producing Product D? $6.50 per pound b. a. $9.25 per pound $17 per pound d. c. $5.25 per pound What is the differential revenue of producing Product D? a. 8. $6.75 per pound b. $9.25 per pound $17 per pound d. c. $5.25 per pound Quail Co. can further process Product B to produce Product C. Product B is currently selling for $60 per pound and costs $42 per pound to produce. Product C would sell for $92 per pound and would require an additional cost of $13 per pound to produce. What is the differential revenue of producing and selling Product C? a. $32 per pound b. $42 per pound c. $50 per pound d. S18 per pound 9
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