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Columbus Manufacturing Company produces products W, X, Y, and Z through a joint process. The joint costs amount to $250,000.

Product	Units Produced	Sales Value at Split-Off	Additional Costs of Processing	Sales Value After Processing
W	750	$10,000	$2,500	$15,000
X	1,500	$30,000	$3,000	$35,000
Y	1,000	$20,000	$4,000	$25,000
Z	1,500	$40,000	$6,000	$45,000

If W is processed further, profits of W will:

Select one:

A.Increase by $2,50.

B.Increase by $5,000.

C.Increase by $2,500.

D.Decrease by $23,000.

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A company loses revenues from regular customers by accepting a special order when operating at capacity. The loss of revenue just described is an example of which of the following?

Select one:

A.An unavoidable cost

B.A revenue cost

C.An opportunity cost

D.A sunk cost

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Hayley Company makes a semi-finished car parts for the automobile industry that has a unit contribution margin of $125 to Miramax. A major customer, Sophie Car Parts, has been purchasing 50 units per month from Hayley for many years, but has indicated that it would prefer to purchase them already machined to its specifications. Sophie has offered to pay an additional $25 per unit for the finished units. To meet those specifications, Hayley would have to rent additional equipment at a cost of $1,000 per month and incur labor and other direct costs of $8 per unit. Calculate advantage or disadvantage of further processing for Hayley.

Select one:

A.$500 advantage

B.$150 advantage

C.$350 advantage

D.$150 disadvantage

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Which of the following statements about sunk costs istrue?

Select one:

A.Sunk costs are the result of past decisions.

B.Sunk costs are never relevant to decisions.

C.Sunk costs do not vary between decision alternatives.

D.All of the above.

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The Northern Ring Company manufactures 2,000 telephones per year. The full manufacturing costs per telephone are as follows:

Direct materials	$ 2
Direct labor	8
Variable manufacturing overhead	6
Average fixed manufacturing overhead	6
Total	$22

The Texas Ring Company has offered to sell Northern Ring Company 2,000 telephones for $15 per unit. If Northern Ring Company accepts the offer, $10,000 of fixed overhead will be eliminated. Northern Ring should:

Select one:

A.Buy the telephones; the savings is $24,000

B.Make the telephones; the savings is $2,000

C.Make the telephones; the savings is $12,000

D.Buy the telephones; the savings is $12,000

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Ice Cream Company makes three products (Chocolate Ice Cream, Vanilla Ice Cream, and Strawberry Icecream), all of which use a very rare ingredient called Nitra Cream. Ice Cream Company can purchase only 500 ounces of Nitra Cream per month from a South American source. Below are data for the three products:

	Chocolate	Vanilla	Strawberry
Unit selling price	$40	$32	$50
Unit variable cost	10	20	30
Unit contribution margin	$30	$12	$20
Nitra Cream (ounces per unit)	10	15	20

How should Ice Cream Company allocate the 500 ounces of Nitra Cream, assuming it can sell unlimited quantities of all three produces?

Select one:

A.All 500 ounces should be allocated to Chocolate Ice Cream.

B.All 500 ounces should be allocated to Vanilla Ice Cream.

C.All 500 ounces should be allocated to Strawberry Ice Cream.

D.None of the above

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Which of the following statements istruewhen making a decision between two alternatives?

Select one:

A.Variable costs are not relevant when the decision alternatives have different activity levels.

B.Taxes are never relevant.

C.Fixed costs are never relevant.

D.Variable costs may not be relevant when the decision alternatives have the same activity levels.

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Pink Bunny Corporation manufactures a product with the following full unit costs at a volume of 2,000 units:

Direct materials	$ 100
Direct labor	40
Manufacturing overhead (30% variable)	75
Selling expenses (50% variable)	25
Administrative expenses (10% variable)	40
Total per unit	$280

A company recently approached Pink Bunny's management with an offer to purchase 225 units for $275 each. Pink Bunny currently sells the product to dealers for $400 each. Pink Bunny's capacity is sufficient to produce the extra 225 units. No selling expenses would be incurred on the special order.

If Pink Bunny's management accepts the offer, profits will:

Select one:

A.Decrease by $60,000

B.Decrease by $24,412.50

C.Increase by $24,412.50.

D.Increase by $33,40.

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Tara produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $12 each and that manufacturing and other costs are as follows:

Variable Cost per Unit

Fixed Cost Per Month

Direct material	$4.00	Factory overhead	$17,000
Direct labor	0.40	Selling and administrative	8,000
Factory overhead	0.50
Distribution	0.10
Total	$5.00	Total	$25,000

The variable distribution costs are for transportation to mail-order distributors. Also assume the current monthly production and sales volume is 20,000 and monthly capacity is 25,000 units. If the sales price per unit increases by $2.00 and unit sales decrease by 2,000 units, Tara's monthly profit would:

Select one:

A.Not change

B.Increase by $36,000

C.Decrease by $22,000

D.Increase by $22,000