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16.

Miko Company manufactures a personal computer designed for use in schools and markets it under its own label. Miko has the capacity to produce 34,000 units a year but is currently producing and selling only 13,000 units a year. The computers normal selling price is $1,680 per unit with no volume discounts. The unit-level costs of the computers production are $430 for direct materials, $200 for direct labor, and $140 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Miko during the year are expected to be $2,220,000 and $802,000, respectively. Assume that Miko receives a special order to produce and sell 3,180 computers at $1,200 each.

Required:

a.

Calculate the contribution to profit from the special order.

b.

Should Miko accept or reject the special order?

Accept

Reject

17.

Mickey & Co. expects overhead costs of $21,500 per month and direct production costs of $15 per unit. The estimated production activity for the 2013 accounting period is as follows:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Units produced	11,800	9,300	8,400	13,500

The predetermined overhead rate based on units produced is (rounded to the nearest penny) is:

$2.00 per unit.

$0.74 per unit.

$21.00 per unit.

$6.00 per unit.

18.

Lubbock Air is a large airline company that pays a customer relations representative $18,750 per month. The representative, who processed 1,020 customer complaints in January and 1,410 complaints in February, is expected to process 22,500 customer complaints during 2015.

Required:

a.

Determine the total cost of processing customer complaints in January and in February. (Do not round your intermediate calculations.)

19.

Breezy Company is disposing of equipment that was originally purchased for $500,000 and has $140,000 of accumulated depreciation to date. The same equipment would cost $620,000 to replace. What is the total amount of sunk cost?

$500,000

$620,000

$360,000

$140,000

20.

Qualitative information is only relevant for decision making if it can be quantified.

True

False

21.

The Sandusky Company recorded the following costs of quality during the current period:

Downtime	$1,500
Inspection	1,000
Product design	4,000
Reliability testing upon completion of production	2,500
Restocking and packaging	1,500
Training	3,000
Warranty repairs and replacements	2,500
Total costs of quality	$16,000

Which choice below represents the correct amount of prevention and appraisal costs?

	Prevention	Appraisal
A)	$4,000	$1,000
B)	$3,000	$1,000
C)	$7,000	$3,500
D)	$3,000	$2,500

Choice D

Choice B

Choice A

Choice C

22.

Franklin Community College operates four departments. The square footage used by each department is shown below.

Department	Square Footage
Accounting	6,000
Marketing	7,000
Technology	9,000
Sciences	6,000
Total	28,000

Franklin's annual building rental cost is $280,000. What amount of rent expense that should be allocated to the Accounting Department? (Do not round your intermediate calculations.)

$280,000

$60,000

$70,000

$90,000

23.

Sunk costs are sometimes relevant for decision-making purposes.

True

False

24.

Trail Power has been using the same machines to make its name brand clothing for the last 5 years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $430,000. The old machines presently have a book value of $143,000 and a market value of $35,000. They are expected to have a 5 year remaining life and zero salvage value. The new machines would cost the company $330,000 and have operating expenses of $17,000 a year. The new machines are expected to have a 5 year useful life and no salvage value. The operating expenses associated with the old machines are $53,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $33,000 a year. Select the true statement.

The company will be $51,000 better off over the 5 year period if it keeps the old equipment.

The company will be $86,000 better off over the 5 year period if it keeps the old equipment.

The company will be $50,000 better off over the 5 year period if it replaces the old equipment.

The company will be $35,000 better off over the 5 year period if it replaces the old equipment.