26) Troxel Company has offered to sell 10,000 units of the same part to Speck for $26 a unit. Assuming no other use for the facilities, Speck  should

A) buy from Troxel as this would save $2 per unit.

B) make the part as this would save $2 per unit.

C) buy from Troxel as this would save $10 per unit.

D) make the part as this would save $10 per unit.

27) Assuming no other use of their facilities, the highest price that Speck should be willing to pay for the part is

A) $24.

B) $28.

C) $16.

D) $22.

28) Assume that Speck can buy 10,000 units of the part from another producer for $30 each. The facilities currently used to make the part  could be rented out to another manufacturer for $40,000 a year. Speck should

A) make the part as that would save $2 per unit.

B) buy the part as that would save $6 per unit.

C) buy the part as that would save $2 per unit.

D) make the part as that would save $6 per unit.

29) Assume that Speck can buy 10,000 units of the part from another  producer for $28 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $10 per unit. No additional fixed costs would be incurred. Speck should

A) make the new product and buy the part to earn an extra $6 per unit contribution to profit.

B) make the new product and buy the part to earn an extra $2 per unit contribution to profit.

C) continue to make the part to earn an extra $2 per unit contribution to profit.

D) continue to make the part to earn an extra $6 per unit contribution to profit.

Bovee Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:

Direct materials

$  24

Direct labour

    40

Variable factory overhead

   32

Fixed factory overhead

    16

Total costs

$112

The fixed factory overhead costs are unavoidable.

30) Clarke Company has offered to sell 10,000 units of the same part to Bovee for $104 a unit. Assuming no other use for the facilities, Bovee should

A) make the part as this would save $8 per unit.

B) buy from Clarke as this would save $20 per unit.

C) make the part as this would save $20 per unit

D) buy from Clarke as this would save $8 per unit.

31) Assuming no other use of their facilities, the highest price that Bovee should be willing to pay for the part is

A) $112.

B) $64.

C) $88.

D) $96.

32) Assume that Bovee can buy 10,000 units of the part from another producer for $120 each. The facilities currently used to make the part could be rented out to another manufacturer for $160,000 a year.

Bovee should

A) buy the part as that would save $24 per unit.

B) buy the part as that would save $4 per unit.

C) make the part as that would save $24 per unit.

D) make the part as that would save $8 per unit.

33) Assume that Bovee can buy 10,000 units of the part from another producer for $112 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $40 per unit. No additional fixed costs would be incurred. Bovee should

A) make the new product and buy the part to earn an extra $8 per unit contribution to profit.

B) continue to make the part to earn an extra $8 per unit contribution to profit.

C) continue to make the part to earn an extra $24 per unit contribution to profit.

D) make the new product and buy the part to earn an extra $24 per unit contribution to profit.

Pett Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:

Direct materials

$  22,500

Direct labour

  32,500

Variable factory overhead

   15,000

Fixed factory overhead

    35,000

Total costs

$105,000

Of the fixed factory overhead costs, $15,000 is avoidable.

34) Titus Company has offered to sell 5,000 units of the same part to Pett for $18 per unit. Assuming there is no other use for the facilities, Pett should

A) make the part as this would save $3 per unit.

B) buy the part as this would save $3 per unit.

C) buy the part as this would save the company $15,000.

D) make the part as this would save $1 per unit.

35) Assuming no other use of their facilities, the highest price that  Pett should be willing to pay for 5,000 units of the part is

A) $105,000.

B) $70,000.

C) $85,000.

D



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