Rocky makes two products, Cuff and Link, and has the following costs: Kocky's overhead costs of $88,000 are allocated based on direct material cost. Assume that 8,000 units of Cuff are produced and 10,000 units of Link are produced. What is the total amount of production costs that will be accumulated for the Link product line? Which of the following activity costs would likely be included in a batch-level activity? a. Quality control costs b. Per unit inspections c. Machine set-up costs d. All of the above Chappy manufactures two lines of pants: Stripe and Plaid. Last year, the Stripe line sold 25,000 and the Plaid sold 32,000. Chappy is considering to eliminate the Stripe line based on the financial statement listed below: Should Chappy eliminate the Stripe slacks line? Tommy has been using the same machines to make its name brand clothing for the last five 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 $100,000. The old machines presently have a book value of $50,000 and a market value of $10,000. They are expected to have an eight-year remaining life and $1,000 salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to thave an eight-year useful life and $5,000 salvage value. The operating expenses associated with the old machines are $15,000 a year. Should Tommy keep or replace the machine, and bow would that decision impact profitability? Montoya Enterprises produces a sword that sells for $200. Although the company's production capacity is 3,400 swords per year, only 2,500 swords are currently being produced and sold. Humperdinck Corporation has offered to purchase 500 swords as a one-time special purchase at a price of $160 per sword. If the special order is accepted, Montoya Enterprises will have to incur additional fixed costs of $1,500 due to additional set-ups. At Montoya's current level of production (2,500 swords), the Montoya Enterprises incurs the following costs: What will be the impact on Montoya's Enterprises' income if the special order is accepted? Ricky-Bobby Company uses 10,000 units of a part in its production process. The costs to make a part are: Ricky-Bobby has received a quote of $60 from a potential supplict for this part. If Ricky-Bobby buys the part, 40 percent of the fixed overhead would continue. Indicate whether Ricky-Bobby should make or buy the part and the dollar amount difference between make and buy. Review terms!!! Allocation, cost driver, cost object, cost pool, overhead, activity-based costing; direct) indirect costs, quality costs, job order vs process costing, relevant costs, sunk cost, opportunity costs, differential revenue / cost, avoidable / unavoidable costs, etc. Review eBook for list
