Multiple Choice Question 53

It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?

 

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$8,000 decrease

 

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$12,000 decrease

 

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$60,000 increase

 

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$8,000 increase

 

Multiple Choice Question 69

Carter, Inc. can make 100 units of a necessary component part with the following costs:

Direct Materials	$120,000
Direct Labor	20,000
Variable Overhead	60,000
Fixed Overhead	40,000

If Carter purchases the component externally, $30,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?

 

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$200,000

 

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$230,000

 

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$240,000

 

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$170,000

 

Multiple Choice Question 79

Mink Manufacturing is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Mink would sell it for $130. The cost to assemble the product is estimated at $42 per unit and the company believes the market would support a price of $170 on the assembled unit. What decision should Mink make?

 

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Sell before assembly, the company will be better off by $2 per unit.

 

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Process further, the company will be better off by $28 per unit.

 

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Sell before assembly, the company will be better off by $40 per unit.

 

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Process further, the company will be better off by $58 per unit.