Lusk Corporation produces and sells 15,500 units of Product X each month. The selling price of Product X is $25 per unit, and variable expenses are $19 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $74,000 of the $105,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:
Multiple Choice
Top of Form
($62,000)
$12,000
$43,000
($43,000)
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Question 1 of 9 Total 1 of 9
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A study has been conducted to determine if Product A should be dropped. Sales of the product total $500,000; variable expenses total $340,000. Fixed expenses charged to the product total $210,000. The company estimates that $60,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the annual financial advantage (disadvantage) for the company of eliminating this product should be:
Multiple Choice
Top of Form
($10,000)
$10,000
($50,000)
$50,000
Bottom of Form
Multiple Choice
LN, JQ, RQ
RQ, LN, JQ
RQ, JQ, LN
JQ, RQ, LN
The Wyeth Corporation produces three products, A, B, and C, from a single raw material input. Product A can be sold at the splitoff point for $40,000, or it can be processed further at a total cost of $15,000 and then sold for $58,000. Joint costs total $60,000 annually. Product A should be:
Multiple Choice
Top of Form
discontinued because revenues after further processing are less than total joint costs.
sold at the split-off point.
processed further and then sold.
processed further only if its share of the total joint costs is less than the incremental revenues from further processing.
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Question 4 of 9 Total 4 of 9
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What is the financial advantage (disadvantage) of Alternative Y over Alternative X?
Multiple Choice
$135,100
$121,700
$148,500
$26,800
The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200.
The sunk cost in this situation is:
Multiple Choice
Top of Form
$10,000
$26,800
$11,200
$0
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Question 6 of 9 Total 6 of 9
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In the company’s accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V86O is discontinued.
What would be the financial advantage (disadvantage) from dropping product V86O?
Multiple Choice
($35,000)
($5,000)
$35,000
$5,000
Multiple Choice
($34,500)
($30,500)
($15,500)
($38,500)
Multiple Choice
JT, SM, VD
JT, VD, SM
VD, SM, JT
SM, VD, JT
Multiple Choice
7.2 hours
12.0 hours
39.6 hours
40.5 hours
Multiple Choice
39.6%
31.6%
60.4%
56.3%
Multiple Choice
21.28
3.90
0.18
5.45
Multiple Choice
3.50%
15.00%
11.15%
.50%
Cabell Products is a division of a major corporation. Last year the division had total sales of $11,440,000, net operating income of $686,400, and average operating assets of $2,402,400. The company’s minimum required rate of return is 13%.
The division’s residual income is closest to:
Multiple Choice
$686,400
$374,088
$(624,624)
$998,712
The Consumer Products Division of Goich Corporation had average operating assets of $470,000 and net operating income of $40,000 in May. The minimum required rate of return for performance evaluation purposes is 9%.
What was the Consumer Products Division’s minimum required return in May?
Multiple Choice
$3,600
$40,000
$45,900
$42,300
Multiple Choice
31.6 hours
3.8 hours
27.8 hours
13.1 hours
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