51. Refer to Chip Division of Computer Solutions, Inc. Assume, for this question only, that the Chip Division is presently operating at a level of 80,000 chips per year. Accepting a "special order" on 2,000 chips at $88 will

a. increase total corporate profits by $4,000.

b. increase total corporate profits by $20,000.

c. decrease total corporate profits by $14,000.

d. decrease total corporate profits by $24,000.

Richmond Steel Corporation

The capital budgeting committee of the Richmond Steel Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model. Information on the existing machine and the new model follows:

Existing machine New machine

Original cost $200,000 $400,000

Market value now 80,000

Market value in year 5 0 20,000

Annual cash operating costs 40,000 10,000

Remaining life 5 yrs. 5 yrs.

52. Refer to Richmond Steel Corporation. The major opportunity cost associated with the continued use of the existing machine is

a. $30,000 of annual savings in operating costs.

b. $20,000 of salvage in 5 years on the new machine.

c. lost sales resulting from the inefficient existing machine.

d. $400,000 cost of the new machine.

53. Refer to Richmond Steel Corporation. The $80,000 market value of the existing machine is

a. a sunk cost.

b. an opportunity cost of keeping the old machine.

c. irrelevant to the equipment replacement decision.

d. a historical cost.

54. Refer to Richmond Steel Corporation. If the company buys the new machine and disposes of the existing machine, corporate profit over the five-year life of the new machine will be ____________________ than the profit that would have been generated had the existing machine been retained for five years.

a. $150,000 lower

b. $170,000 lower

c. $230,000 lower

d. $150,000 higher

55. Emerald Corporation has been manufacturing 5,000 units of Part 10541, which is used in the manufacture of one of its products. At this level of production, the cost per unit of manufacturing Part 10541 is as follows:

Direct material $ 2

Direct labor 8

Variable overhead 4

Fixed overhead applied 6

Total $20

Hamilton Company has offered to sell Emerald 5,000 units of Part 10541 for $19 a unit. Emerald has determined that it could use the facilities currently used to manufacture Part 10541 to manufacture Part RAC and generate an operating profit of $4,000. Emerald has also determined that two-thirds of the fixed overhead applied will continue even if Part 10541 is purchased from Hamilton. To determine whether to accept Hamiltons offer, the net relevant costs to make are

a. $70,000.

b. $84,000.

c. $90,000.

d. $95,000.

56. Harding Corporation manufactures batons. Harding can manufacture 300,000 batons a year at a variable cost of $750,000 and a fixed cost of $450,000. Based on Harding's predictions, 240,000 batons will be sold at the regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 40 percent discount off the regular price. The unit relevant cost per unit for Harding's decision is

a. $1.50.

b. $2.50.

c. $3.00.

d. $4.00.

57. The objective in solving the linear programming problem is to determine the optimal levels of the

a. coefficients.

b. dependent variables.

c. independent variables.

d. slack variables.

58. A linear programming problem can have

a. no more than three resource constraints.

b. only one objective function.

c. no more than two dependent variables for each constraint equation.

d. no more than three independent variables.

59. A linear programming model must

a. have only one objective function.

b. have as many independent variables as it has constraint equations.

c. have at least two dependent variables for each equation.

d. consider only the constraints that can be expressed as inequalities.

60. In a linear programming problem, constraints are indicated by

a. the independent variables.

b. the dependent variables in the constraint equations.

c. the coefficients of the objective function.

d. iso-cost lines.