Expert answer:Individual Assignment – Incremental Analysis
Solved by verified expert:You should read all of Chapter 20 before beginning this assignment.Complete Ch. 20 quiz on Incremental Analysis (see link at left) using quiz answer sheet (see link at left). You must submit your answers using the quiz answer sheet. No other submission will be graded.Here’s the school linkhttps://phoenix.vitalsource.com/#/books/9781119244…My login email is foluke33@email.phoenix.edupassword is Jehova33@ the J is capital letter.I attached the quiz and answer sheet below
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incrementalanalysisquiz.doc
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Ch. 20 Quiz
1.
A major accounting contribution to the managerial decision-making process in evaluating
possible courses of action is to
a. assign responsibility for the decision.
b. provide relevant revenue and cost data about each course of action.
c. determine the amount of money that should be spent on a project.
d. decide which actions that management should consider.
2.
Costs that will differ between alternatives and influence the outcome of a decision are
a. sunk costs.
b. unavoidable costs.
c. relevant costs.
d. product costs.
3.
Alvarez Company is considering the following alternatives:
Alternative A
Alternative B
Revenues
$50,000
$60,000
Variable costs
30,000
30,000
Fixed costs
10,000
16,000
What is the incremental profit?
a. $10,000
b. $0
c. $6,000
d. $4,000
4.
Which of the following is an irrelevant cost?
a. An avoidable cost
b. An incremental cost
c. A sunk cost
d. An opportunity cost
5.
Which of the following is a true statement about cost behaviors in incremental analysis?
1. Fixed costs will not change between alternatives.
2. Fixed costs may change between alternatives.
3. Variable costs will always change between alternatives.
a. 1
b. 2
c. 3
d. 2 and 3
6.
It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom
scale which normally sells for $35. A foreign wholesaler offers to purchase 3,000 scales at
$15 each. Garner would incur special shipping costs of $1 per scale if the order were
accepted. Garner has sufficient unused capacity to produce the 3,000 scales. If the
special order is accepted, what will be the effect on net income?
a. $6,000 increase
b. $6,000 decrease
c. $9,000 decrease
d. $45,000 increase
20 – 2
Test Bank for Accounting, Sixth Edition
7.
Baden Company manufactures a product with a unit variable cost of $100 and a unit sales
price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were
produced and sold. The company has a one-time opportunity to sell an additional 1,000
units at $140 each in a foreign market which would not affect its present sales. If the
company has sufficient capacity to produce the additional units, acceptance of the special
order would affect net income as follows:
a. Income would decrease by $8,000.
b. Income would increase by $8,000.
c. Income would increase by $140,000.
d. Income would increase by $40,000.
8.
Miley, Inc. has excess capacity. Under what situations should the company accept a
special order for less than the current selling price?
a. Never
b. When additional fixed costs must be incurred to accommodate the order
c. When the company thinks it can use the cheaper materials without the customer’s
knowledge
d. When incremental revenues exceed incremental costs
9.
Martin Company incurred the following costs for 70,000 units:
Variable costs $420,000
Fixed costs
392,000
Martin has received a special order from a foreign company for 3,000 units. There is
sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will
require spending an additional $6,300 for shipping.
If Martin wants to break even on the order, what should the unit sales price be?
a. $6.00
b. $8.10
c. $11.60
d. $13.70
10.
Martin Company incurred the following costs for 70,000 units:
Variable costs $420,000
Fixed costs
392,000
Martin has received a special order from a foreign company for 3,000 units. There is
sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will
require spending an additional $6,300 for shipping.
If Martin wants to earn $6,000 on the order, what should the unit price be?
a. $9.70
b. $15.70
c. $8.00
d. $10.10
Incremental Analysis
11.
12.
20 – 3
It costs Lannon Fields $28 of variable costs and $12 of allocated fixed costs to produce an
industrial trash can that sells for $60. A buyer in Mexico offers to purchase 3,000 units at
$36 each. Lannon Fields has excess capacity and can handle the additional production.
What effect will acceptance of the offer have on net income?
a. Decrease $12,000
b. Increase $12,000
c. Increase $108,000
d. Increase $24,000
Chapman Company manufactures widgets. Embree Company has approached Chapman
with a proposal to sell the company widgets at a price of $125,000 for 100,000 units.
Chapman is currently making these components in its own factory. The following costs are
associated with this part of the process when 100,000 units are produced:
Direct materials
$ 46,500
Direct labor
43,500
Manufacturing overhead
60,000
Total
$150,000
The manufacturing overhead consists of $24,000 of costs that will be eliminated if the
components are no longer produced by Chapman. From Chapman’s point of view, how
much is the incremental cost or savings if the widgets are bought instead of made?
a. $25,000 incremental savings
b. $11,000 incremental cost
c. $11,000 incremental savings
d. $25,000 incremental cost
13.
The cost to produce Part A was $20 per unit in 2016. During 2017, it has increased to $23
per unit. In 2017, Supplier Company has offered to supply Part A for $18 per unit. For the
make-or-buy decision,
a. incremental revenues are $5 per unit.
b. incremental costs are $3 per unit.
c. net relevant costs are $3 per unit.
d. differential costs are $5 per unit.
14.
Max Company uses 20,000 units of Part A in producing its products. A supplier offers to
make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A.
If there is excess capacity, the opportunity cost of not buying Part A from the supplier is
a. $0.
b. $20,000.
c. $140,000.
d. $160,000.
20 – 4
15.
Test Bank for Accounting, Sixth Edition
Galley Industries can produce 100 units of a necessary component part with the following
costs:
Direct Materials
Direct Labor
Variable Overhead
Fixed Overhead
$20,000
9,000
21,000
8,000
If Galley Industries purchases the component externally, $2,000 of the fixed costs can be
avoided. Below what external price for the 100 units would Galley choose to buy instead
of make?
a. $50,000
b. $56,000
c. $44,000
d. $52,000
16.
Fornelli, Inc. can produce 100 units of a component part with the following costs:
Direct Materials
$15,000
Direct Labor
6,500
Variable Overhead
16,000
Fixed Overhead
11,000
If Fornelli, Inc. can purchase the component part externally for $44,000 and only $4,000 of
the fixed costs can be avoided, what is the correct make-or-buy decision?
a. Make and save $500
b. Buy and save $500
c. Make and save $2,500
d. Buy and save $6,500
17.
Eddy Company is starting business and is unsure of whether to sell its product assembled
or unassembled. The unit cost of the unassembled product is $60 and Eddy Company
would sell it for $135. The cost to assemble the product is estimated at $27 per unit and
Eddy Company believes the market would support a price of $174 on the assembled unit.
What is the correct decision using the sell or process further decision rule?
a. Sell before assembly, the company will be better off by $27 per unit.
b. Sell before assembly, the company will be better off by $39 per unit.
c. Process further, the company will be better off by $39 per unit.
d. Process further, the company will be better off by $12 per unit.
18.
Marcus Company gathered the following data about the three products that it produces:
Present
Estimated Additional
Estimated Sales
Product
Sales Value
Processing Costs
if Processed Further
A
$12,000
$8,000
$21,000
B
14,000
5,000
18,000
C
11,000
3,000
16,000
Which of the products should not be processed further?
a. Product A
b. Product B
c. Product C
d. Products A and C
Incremental Analysis
19.
20 – 5
The costs incurred prior to the split-off point are referred to as
a. separable costs.
b. split-off costs.
c. joint product costs.
d. joint costs.
20. Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of
which appear below for 2017:
Sales
Variable expenses
Fixed expenses
Net loss
$1,400,000
920,000
600,000
$ (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. $180,000
b. $1,520,000
c. $1,340,000
d. $1,100,000
…
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