Otool Inc. is considering using stocks of an old raw material in a special project. The special project would require all 150 kilograms of the raw material that are in stock and that originally cost the company $2,346 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $8 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $7.20 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $74 for all 150 kilograms. What is the relevant cost of the 150 kilograms of the raw material when deciding whether to proceed with the special project?

Multiple Choice

• $1,185

• $1,006

• $1,165

• $1,080

#2

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

	Products
	A		B		C		D
Direct materials	$	16.20	$	20.10	$	13.10	$	15.80
Direct labor		18.20		21.60		16.00		10.00
Variable manufacturing overhead		5.00		6.20		8.70		5.70
Fixed manufacturing overhead		28.10		15.00		15.10		17.10
Unit product cost		67.50		62.90		52.90		48.60

Additional data concerning these products are listed below.

	Products
	A		B		C		D
Grinding minutes per unit		2.30		1.40		1.00		0.60
Selling price per unit	$	81.70	$	74.10	$	70.90	$	65.60
Variable selling cost per unit	$	3.20	$	3.70	$	3.40	$	4.10
Monthly demand in units	3,600		2,600		2,600		4,600

The grinding machines are potentially the constraint in the production facility. A total of 10,500 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Which product makes the MOST profitable use of the grinding machines? (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-09-13

Multiple Choice

• Product C

• Product B

• Product A

• Product D

#2

The Tolar Corporation has 500 obsolete desk calculators that are carried in inventory at a total cost of $720,000. If these calculators are upgraded at a total cost of $110,000, they can be sold for a total of $170,000. As an alternative, the calculators can be sold in their present condition for $50,000.

Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

Multiple Choice

• $770 per calculator

• $110 per calculator

• $320 per calculator

• $230 per calculator