Nook Company currently produces a key part at a total cost of $180-000.docx

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Nook Company currently produces a key part at a total cost of $180,000. Annual variable costs are $163,000. Of the annual fixed costs, $18,000 relate specifically to this part. The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part annually for $175,000. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $45,500 per year. Alternatively, the facilities could be rented out at $32,000 per year. Given all of these alternatives, what is Nook Company\'s lowest net relevant cost for the parts? A. $163,000 B. $125,000 C. $129,500 D. $181,000 Solution The correct answer is C Solution: A relevant cost is a cost that differs between alternatives in a decision. Not all fixed costs are sunk .

Nook Company currently produces a key part at a total cost of $180,000. Annual variable costs
are $163,000. Of the annual fixed costs, $18,000 relate specifically to this part. The remaining
fixed costs are unavoidable.
Another manufacturer has offered to supply the part annually for $175,000. The facilities
currently used to manufacture the part could be used to manufacture a new product with an
expected contribution margin of $45,500 per year. Alternatively, the facilities could be rented out
at $32,000 per year. Given all of these alternatives, what is Nook Company's lowest net relevant
cost for the parts?
A. $163,000
B. $125,000
C. $129,500
D. $181,000
Solution
The correct answer is C
Solution:
A relevant cost is a cost that differs between alternatives in a decision. Not all fixed costs are
sunk

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ChristopherOjeda123

Question 1 of 40 2.5 Points Capital Manufacturing designs and manufactures bathtubs for home and commercial applications. Capital recorded the following data for its commercial bathtub production line during the month of March. Standard DL hours per tub 3 Standard overhead rate per DL hour $6.50 Standard overhead cost per unit $19.50 Actual overhead costs $22,750 Actual DL hours 3,250 Actual overhead cost per machine hour $7.00 Actual tubs produced 1,100 What is the variable manufacturing overhead efficiency variance for March? A. $1,625 unfavorable B. $325 unfavorable C. $1,625 favorable D. $325 favorable Question 2 of 40 2.5 Points Which of the following formulas is used to compute variable overhead rate (or spending) variance? A. Actual hours x (actual rate – standard rate) B. Standard hours allowed x (actual rate – standard rate) C. Actual rate x (actual hours – standard hours allowed) D. Standard rate x (actual hours – standard hours allowed) Question 3 of 40 2.5 Points How is the direct labor efficiency variance calculated? A. The difference between the standard labor hours allowed and the actual labor hours used multiplied by the actual labor rate B. The difference between the standard labor hours allowed and the actual labor hours used multiplied by the standard labor rate C. The difference between the standard labor hours and the actual labor hours used D. The difference between the standard labor rate and the actual labor rate Question 4 of 40 2.5 Points Myles Company budgeted 10,500 pounds of direct materials costing $23.50 per pound to make 5,300 units of product. The company actually purchased 11,000 pounds of direct materials costing $25 per pound to make the 5,300 units. What is the direct materials price variance? A. $16,500 favorable B. $16,500 unfavorable C. $15,750 unfavorable D. $15,750 favorable Question 5 of 40 2.5 Points A company produced 2,200 units of output during a production process that normally requires 2 hours of labor per unit of output. The standard labor rate is $16 per hour, but the company paid $15 per hour. Actual hours needed to complete the production process were 4,600. How much was the labor rate variance? A. $4,400 favorable B. $4,400 unfavorable C. $4,600 favorable D. $4,600 unfavorable Question 6 of 40 2.5 Points How is the variable manufacturing overhead efficiency variance calculated? A. The difference between the actual overhead rate and the standard overhead rate multiplied by the standard overhead rate B. The difference between the standard hours allowed and the actual hours used multiplied by the standard overhead rate C. The difference between the standard hours allowed and the actual hours used D. The difference between the standard hours allowed and the actual hours used multiplied by the actual overhead rate Question 7 of 40 2.5 Points A company uses a single raw material in its production process. The standard pric ...

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ACCT 5302 Multiple Choice Review Questions and Answers – Exa.docx

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