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Chapter 23: Relevant Costing for Managerial Decisions

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Financial & Managerial Accounting
Pages: 1032 - 1063

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62 Questions for Chapter 23: Relevant Costing for Managerial Decisions

  1. Windmire Company manufactures and sells to local wholesalers approximately 300,000 units per month

    Found on Page 1058
  2. A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each, or theycan be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is, the company will be able to build 22,000 replacement units at a cost of $6 each, and sell them at the full price of $8.50 each. (1) What is the incremental income from selling the units as scrap? (2) What is the incremental income from reworking and selling the units? (3) Should the company sell the units as scrap or rework them?

    Found on Page 1053
  3. Assume that Samsung manufactures and sells 60,000 units of a product at $11,000 per unit in domestic markets. It costs $6,000 per unit to manufacture ($4,000 variable cost per unit, $2,000 fixed cost per unit). Can you describe a situation under which the company is willing to sell an additional 8,000 units of the product in an international market at $5,000 per unit?

    Found on Page 1049
  4. Suresh Co. expects its five departments to yield the following income for next year.

    Found on Page 1053
  5. Holmes Company produces a product that can be either sold as is or processed further. Holmes has already spent $50,000 to produce 1,250 units that can be sold now for $67,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $250 per unit. If Holmes processes further, the units can be sold for $375 each. Compute the incremental income if Holmes processes further.

    Found on Page 1050
  6. Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 4 pounds of the material, S5 uses 3 pounds of the material, and G9 uses 6 pounds of the material. Demand for all products is strong, but only 50,000 pounds of material are available. Information about the selling price per unit and variable cost per unit of each product follows. Orders for which product should be produced and filled first, then second, and then third? Support your answer.

    Found on Page 1053
  7. A company has already incurred $5,000 of costs in producing 6,000 units of Product XY. Product XY can be sold as is for $15 per unit. Instead, the company could incur further processing costs of $8 per unit and sell the resulting product for $21 per unit. Should the company sell Product XY as is or process it further?

    Found on Page 1050
  8. Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $45,000 and a remaining useful life of five years, at which time its salvage value will be zero. It has a currentmarket value of $52,000. Variable manufacturing costs are $36,000 per year for this machine. Information on two alternative replacement machines follows. Should Xinhong keep or replace its manufacturing machine? If the machine should be replaced, which alternative new machine should Xinhong purchase? Alternative B

    Found on Page 1054
  9. Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity. It can produce two units of X per hour orthree units of Y per hour, and it has 4,000 production hours available. Contribution margin is $5 for Product X and $4 for Product Y. What is the most profitable sales mix for this company?

    Found on Page 1050
  10. Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is

    Found on Page 1054

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