The Norran Company needs 15,000 units of a certain part to usein its production cycle. If Norran buys the part from WaterlooCompany instead of making it, Norran could not use the releasedfacilities in another activity; thus, all of the fixed overheadapplied will continue regardless of what decision is made.Accounting records provide the following data:
Cost to Norran to make the part:
Direct materials,$3
Direct labor, $12
Variable overhead,$13
Fixed overheadapplied, $8
Cost to buy the part from the WaterlooCompany, $27
18.
What should Norran's decision be, and what is the total costsavings that would result?
A)
Make, $90,000
B)
Buy, $90,000
C)
Make, $15,000
D)
Buy, $15,000
27.
When considering the time value of money, usecompounding to find the __________ value of money nowheld.
A)
discounted
B)
present
C)
historical
D)
future
28.
The normal selling price of our product is $42 per unit.The costs of production are direct materials, $8; direct labor, $6;variable overhead, $7; and fixed overhead, $4 (based on normalcapacity). The company has received a special order for 14,400units at a unit sales price of $23. There is ample unused capacityto fill the order and $1 per unit will be incurred for additionalfreight costs. If the order is accepted, operating incomewill
A)
decrease by $28,800.
B)
increase by $14,400.
C)
decrease by $43,200.
D)
increase by $28,800.
30.
The point at which products are separated in a joint productionprocess is the
A)
joint product point.
B)
breakeven point.
C)
split-off point.
D)
separation point.
31.
The difference in total costs between two alternatives isreferred to as the
A)
direct cost.
B)
incremental cost.
C)
sunk cost.
D)
opportunity cost.
The Norran Company needs 15,000 units of a certain part to usein its production cycle. If Norran buys the part from WaterlooCompany instead of making it, Norran could not use the releasedfacilities in another activity; thus, all of the fixed overheadapplied will continue regardless of what decision is made.Accounting records provide the following data:
Cost to Norran to make the part:
Direct materials,$3
Direct labor, $12
Variable overhead,$13
Fixed overheadapplied, $8
Cost to buy the part from the WaterlooCompany, $27
18. | What should Norran's decision be, and what is the total costsavings that would result? | |
A) | Make, $90,000 | |
B) | Buy, $90,000 | |
C) | Make, $15,000 | |
D) | Buy, $15,000 | |
27. | When considering the time value of money, usecompounding to find the __________ value of money nowheld. | |
A) | discounted | |
B) | present | |
C) | historical | |
D) | future | |
28. | The normal selling price of our product is $42 per unit.The costs of production are direct materials, $8; direct labor, $6;variable overhead, $7; and fixed overhead, $4 (based on normalcapacity). The company has received a special order for 14,400units at a unit sales price of $23. There is ample unused capacityto fill the order and $1 per unit will be incurred for additionalfreight costs. If the order is accepted, operating incomewill | |
A) | decrease by $28,800. | |
B) | increase by $14,400. | |
C) | decrease by $43,200. | |
D) | increase by $28,800. | |
30. | The point at which products are separated in a joint productionprocess is the | |
A) | joint product point. | |
B) | breakeven point. | |
C) | split-off point. | |
D) | separation point. | |
31. | The difference in total costs between two alternatives isreferred to as the | |
A) | direct cost. | |
B) | incremental cost. | |
C) | sunk cost. | |
D) | opportunity cost. | |
Related questions
Make-or-Buy Decision
Switzer Coporation makes motorcycle engines. The company'srecords show the following unit costs to manufacture part#61645:
| Direct Materials | $12 |
| Direct Labor | 15 |
| Variable Overhead | 20 |
| Fixed Overhead | 10 |
Another manufacture has offered to supply Switzer Corporationwith part #61645 for cost of $50 per unit. Switzer uses 1,000 unitsannually.
If Switzer accepts the offer, what will be the short-run impacton income?
