Reference no: EM132704647

Questions -

Q1. Surplus Tyre Company produces and sells 40,000 tyres per month. The normal sales price is $30 per tyre. The costs to produce one tyre are $4 of direct materials, $3 of direct labor, $8 of variable overhead, and $2 of fixed overhead. A special order for 1,000 tyre at $15 each has been received. Assuming fixed overhead costs will not increase and present sales will not be affected, the profit increase or decrease from accepting this special order is:

a. A $2,000 decrease.

b. A $2,000 increase.

c. $0.

d. An $8,000 increase.

Q2. A college student has two potential job offers upon graduation. Job choice #1 pays $48,000 per year. Job choice #2 pays $45,000 per year. Should the student choose job #1, the opportunity cost is $45,000.

a. True

b. False

Q3. A net loss of $60,000 was reported for Product X of the Round Manufacturing Company for the past year. This loss was computed as follows: Sales $300,000 Variable Costs (120,000) Fixed Costs (240,000) Net Loss $(60,000) Because of the loss, Round is considering discontinuing Product X. The Cost Accounting Department estimates that 60% of Product X's fixed costs are avoidable and 40% are unavoidable. If Product X is discontinued, how will Round's total profit change?

a. Increase by $24,000

b. Decrease by $36,000

c. Increase by $60,000

d. Decrease by $60,000

Q4. Consider the following information and answer the question below.

Selling cost Direct Labour price Advertising cost Machinery Sales costs

Product X 12,000 units $5 per unit $3 per unit $400 $5000

Product Y 16,000 units $4 per unit $3.50 per unit $200 $6200

Which of the following is true?

a. contributes more to profit than Product Y.

b. has higher variable costs than Product Y.

c. produces lower profits than Product Y.

d. has higher fixed costs that Product Y.