7.

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $512,000 or a new model 220 machine costing $408,000 to replace a machine that was purchased 12 years ago for $455,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired.

Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L.

Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $408,000 in the new machine, the money could be invested in a project that would return a total of $485,000.

In making the decision to invest in the model 220 machine, the opportunity cost was:

Multiple Choice

• $455,000

• $408,000

• $512,000

• $485,000

13.

Opunui Corporation has two manufacturing departments--Molding and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Molding		Finishing		Total
Estimated total machine-hours (MHs)		3,250		1,750		5,000
Estimated total fixed manufacturing overhead cost	$	28,000	$	5,200	$	33,200
Estimated variable manufacturing overhead cost per MH	$	2.50	$	5.00

During the most recent month, the company started and completed two jobs--Job A and Job M. There were no beginning inventories. Data concerning those two jobs follow:

	Job A		Job M
Direct materials	$	16,900	$	10,300
Direct labor cost	$	23,600	$	10,600
Molding machine-hours		1,250		2,000
Finishing machine-hours		1,250		500

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. The total manufacturing cost assigned to Job M is closest to: (Round "Predetermined overhead rate" to 2 decimal places.)

Multiple Choice

• $25,050

• $10,600

• $45,950

• $10,300