(acct301) cost accounting

q1. A manufacturing company is considering whether to drop or keep the product X because it realized net operating losses of 50,000 SR. The income statement for the product as follows:

• Net sales 200,000
• Variable costs 125,000
• Contribution margin 75,000
• Allocated fixed costs 75,000
• Traced and avoidable fixed costs 50,000
• Net operating loss 50,000

What is the right decision?

a. Keep because the contribution margin is less than relevant fixed costs.

b. Keep because the contribution margin is greater than relevant fixed costs.

c. Drop to avoid net operating loss of 50,000.

q2. A special order has been received by a company to purchase 5,000 units for 25 SR per unit that is being sold to regular customers for 35 SR. Cost details per unit as follows:

• Direct material SR 5
• Direct labor SR 7
• Variable manufacturing overhead SR 7
• Fixed manufacturing overhead allocated SR 8
• Selling and administrative expenses SR 5
• Traced and avoidable Fixed manufacturing overhead SR 8

What is the right decision?

a. Relevant cost is 40 and the decision is to outsource.

b.Relevant cost is 10 and the decision is to in source.

c. Relevant cost is 27 and the decision is to outsource.

q3. The cost to in source is

a. Relevant variable cost+ irrelevant fixed cost- opportunity cost.

b. Relevant variable cost+ relevant fixed cost+ opportunity cost.

c. Relevant fixed cost - relevant variable cost+ opportunity cost.

q4. Below is the information about product X , Y

Particular	X	Y	Total
Contribution margin per unit	50	70
Labor hour per unit	2	4
Labor hours available			120,000

Assuming Labor hours available are constrained and the demand for the products are unlimited.

What is the mix of sales that maximize the contribution margin for the company?

a. 10, 000 units from product Y

b. 60,000 units from product X

c. 30,000 units from product Y

q5. Below is the information about product X , Y

Particular	X	Y	Total
Contribution margin per unit	50	70
Labor hour per unit	2	4
Labor hours available			120,000

Assuming Labor hours available are constrained and the demand for the products X limited as a maximum of 40,000 units.

What is the mix of sales that maximize the contribution margin for the company?

a. 40,000 units from product X and 10,000 units from Y.

b. 30,000 units from product Y

c. 60,000 units from product X

q6. Which of the following is correct In case of accepting special order at the expense of sales to regular customers.

a. Oportunity cost should be deducted from relevant costs.

b. Oportunity cost should be added to relevant costs to be covered by the price for the special order.

c. No effects on profit.