Seasons manufacturing manufactures a product with a unit variable cost of $100 and a unit sales price

1. Seasons manufacturing manufactures a product with a unit variable cost of $100 and a unit sales price of $ 176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

A. Income would increase by $8000

B. Income would increase by $140,000

C. Income would decrease by $8000

D. Income would increase by $40,000

2. Carter, Inc. can make 100 units of a necessary component part with the following costs:

Direct materials          $120,000

Direct Labor               20,000

Variable

Overhead                60,000

Fixed overhead     40,000

If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or buy decision?

A.  Make and save $30,000

B.   Buy and save $10,000

C.  Make and save $10,000

D. Buy and save $30,000

3.  A company has a process that results in 15,000 pounds of product A that can be sold for $16 per pound. An alternative would be to process product A further at a cost of $200,000 and then sell it for $28 per pound. Should management sell product A now or should product A be processed further and then sold? What is the effect of the action?

A. Sell now, the company will be better off by $200,000

B. Process further, the company will be better off by $180,000

C. Process further, the company will be better off by $ 20,000

D. Sell now, the company will be better off by $20,000

4.  Fixed costs are $600,000 and the contribution margin per unit is $150. What is the break-even point?

A. $4,000,000

B. 1,500 units

C. 4,000 units

D $1, 500,000

5.  It costs Ross Company $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $ 70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?

A. $ 8000 increase

B. $ 8000 decrease

6.  Carter, Inc can make 100 units of a necessary component part with the following costs:

Direct materials               $120,000

Direct labor                    $20,000

Variable                           60,000

Overhead

Fixed Overhead             40,000

If Carter purchases the component externally, $30,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?

A. $ 230,000

B. $ 240,000