1) The Regal Baking Company is considering the expansion of its business into door-to-door delivery service. This would require an additional $12,500 in labor costs per month. Company-owned vehicles now used to make morning deliveries to restaurants could be used in the afternoons to make the home deliveries. However, it is estimated that an additional $5,000 would be required per month for gas, oil and maintenance. It is further estimated that the home delivery used of the trucks would be allocated 45% of the existing $6,500 fixed vehicle costs. What is the differential delivery cost per month for expanding into the home delivery market?
a) 12,500 b) 17,500 c) 19,750 d) 20,425 e) some other answer
- Which of the following costs are irrelevant to the make-or-buy decision?
a) indirect materials and indirect labor if the item is manufactured internally b) direct materials and direct labor if the item is purchased c) variable overhead if the item is manufactured internally d) fixed overhead that can be avoided if the item is purchased e) fixed overhead that will continue if the item is purchased
- which of the following statements regarding special orders is (are) true? (A) the primary decision for special is determining whether the differential revenue is greater than the differential costs with the order. (B) The differential analysis approach to pricing for special orders could lead to underpricing in the long-run because fixed costs are not included in the analysis
a)only A b)only B c)Neither A or B d)Both A an B are true
- For the past five years, the RS Company has produced and sold electronic magnets to chemistry labs throughout the United States. Recently, a strong competitor has entered the market and RS is considering whether it should continue to produce and sell the electronic magnets. The following information has been gathered to assist management in their decision: a) the machinery used to produced the magnet was purchased five-years ago for 500,000. b) Four of the employees who produced magnets would be transferred to the magnifying glass division. c) the space now used to produce the magnets would be used to eliminate the need to rent warehouse space. d) sales volume (units) is estimated to drop by 50% once the competitor becomes fully operational.
a) A and C b) B and C c) C and D d) A, B, and D.
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