MCQ? 1- Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $500,000 $200,000 $65,000 $765,000 Variable expenses $325,000 $140,000 $ 58,000 $523,000 Contribution margin $175,000 $ 60,000 $ 7,000 $242,000 Fixed expenses $ 75,000 $ 35,000 $ 22,000 $132,000 Net income (loss) $100,000 $ 25,000 $ (15,000) $110,000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? a. $103,000 b. $140,000 c. $125,000 d. $105,000 2- Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be a. $150. b. $7,350. c. $(150). d. $(3,600). 3- Able Company?s unit manufacturing cost is: Variable Costs $50 Fixed Costs 25 A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit (loss) will be. a. $(46,000). b. $6,000. c. $10,000. d. $(40,000). 4- Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price $300,000 $600,000 Accumulated Depreciation $ 90,000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs $240,000 $180,600 If the old machine is replaced, it can be sold for $24,000.The net advantage (disadvantage) of replacing the old machine is: a. $24,000 b. $(60,000) c. $18,000 d. $(6,000) 5- Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 55,000 Direct labor $160,000 Variable overhead $ 75,000 Fixed overhead $175,000 If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $68, net income will increase (decrease) by: a. $(10,000). b. $85,000. c. $125,000. d. $(50,000). 6- Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2013: Sales $1,400,000 Variable expenses $ 920,000 Fixed expenses $ 600,000 Net loss $ (120,000) If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line? a. $1,340,000 b. $1,100,000 c. $1,520,000 d. $180,000 7- Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000. At what price were the updated versions sold? a. $26,800 b. $16,000 c. $13,600 d. $13,200 8- Paul Bunyan Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: Sales Value Additional Sales Value after Product at Split-off Variable Costs Further Processing Green lumber $159,600 $24,000 $178,000 Rough lumber $124,000 $28,200 $173,600 Sawdust $102,000 $19,600 $130,000 The additional profit that would result from processing rough lumber further is a. $49,600. b. $145,400. c. $95,800. d. $21,400.

Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A -1 :condensed segmented income statement for a recent period follows Wood Aluminum Hard Rubber Total Sales $500,000 $200,000 $65,000 $765,000 Variable expenses $325,000 $140,000 $ 58,000 $523,000 Contribution margin $175,000 $ 60,000 $ 7,000 $242,000 Fixed expenses $ 75,000 $ 35,000 $ 22,000 $132,000 Net income (loss) $100,000 $ 25,000 $ (15,000) $110,000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be ?total net income if the line is dropped $103, .a 000 $140, .b 000 $125, .c 000 $105, .d 000 :Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent Direct materials $8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 .An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit -2 If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be .$150 .a .$7,350 .b .(150)$ .c 3,600)$ .d .( :Able Company's unit manufacturing cost is -3 Variable Costs $50 Fixed Costs 25 A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit .(loss) will be .(46,000)$ .a .$6,000 .b .$10,000 .c .(40,000)$ .d Sala Co. is contemplating the replacement of an old machine with a new one. The following :information has been gathered Old Machine New Machine Price $300,000 $600,000 -Accumulated Depreciation $ 90,000 0 -Remaining useful life 10 years 0 Useful life 0 10 years Annual operating costs $240,000 $180,600 -4 If the old machine is replaced, it can be sold for $24,000.The net advantage (disadvantage) :of replacing the old machine is $24,000 .a (60,000)$ .b $18,000 .c (6,000)$ .d Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of :production -5 Direct materials $ 55,000 Direct labor $160,000 Variable overhead $ 75,000 Fixed overhead $175,000 If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. :If the outside supplier offers a unit price of $68, net income will increase (decrease) by .(10,000)$ .a .$85,000 .b .$125,000 .c .(50,000)$ .d Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of :which appear below for 2013 -6 Sales $1,400,000 Variable expenses $ 920,000 Fixed expenses $ 600,000 (Net loss $ (120,000 If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the ?relevant costs in the decision to eliminate this product line $1,340,000 .a $1,100,000 .b $1,520,000 .c $180,000 .d HiTech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If HiTech updates the computers and sells them, net income will increase by $9,000. At what price ?were the updated versions sold -7 $26,80 .a 0 $16,00 .b 0 $13,60 .c 0 $13,20 .d 0 Paul Bunyan Lumber Co. produces several products that can be sold at the splitoff point or :processed further and then sold. The following results are from a recent period -8 Sales Value Additional Sales Value after Product at Splitoff Variable Costs Further Processing Green lumber $159,600 $24,000 $178,000 Rough lumber $124,000 $28,200 $173,600 Sawdust $102,000 $19,600 $130,000 The additional profit that would result from processing rough lumber further is .$49,600 .a .$145,400 .b .$95,800 .c .$21,400 .d