1. Cariboo Manufacturing Company incurred a joint cost of
$1,440,000 in the production of X and Y in a joint process.
Presently, 3,800 of X and 3,400 of Y are being produced each month.
Management plans to decrease X's production by 1,300 units in order
to increase the production of Y by 1,700 units. Additionally, this
change will require minor modifications, which will add $99,360 to
the joint cost. This cost is entirely attributable to product Y.
What is the amount of the joint costs allocable to X and Y before
changes to existing production, assuming Cariboo allocates their
joint costs according to the proportion of Y and X produced?
| Product X | Product Y | |||||
| A. | $ | 680,000 | $ | 760,000 | ||
| B. | $ | 687,206 | $ | 753,424 | ||
| C. | $ | 696,029 | $ | 743,971 | ||
| D. | $ | 760,000 | $ | 680,000 | ||
Option A
Option D
Option B
Option C
2.The following data are available for the South Division of Manhattan Products, Inc. and the single product it makes:
| Unit selling price | $ | 31 | |
| Variable cost per unit | $ | 23 | |
| Annual fixed costs | $ | 291,000 | |
| Average operating assets | $ | 1,610,000 | |
How many units must South sell each year to have an ROI of 12%?
193,200.
60,525.
201,250.
48,420.
3. Altoona Corporation has two divisions, Hinges and Doors,
which are both organized as profit centers; the Hinge Division
produces and sells hinges to the Door Division and to outside
customers. The Hinge Division has total costs of $43, $26 of which
are variable. The Hinge Division is operating significantly below
capacity and sells the hinges for $58.
The Door Division has received an offer from an outsider vendor to
supply all the hinges it needs (32,000 hinges) at a cost of $53.
The manager of the Door Division is considering the offer but wants
to approach the Hinge Division first.
What is the maximum transfer price from the Hinge Division to the
Door Division?
$53.
$26.
$58.
$43.
1. The correct answer is option D
Total units = 7200 units
Cost allocated to product X =3800/7200*1440000 = $760000
Cost allocated to Y = 3400/7200*1440000 = $680000
2. Average operating assets = $1610000
Return required = 1610000*12% = $193200
Contribution per unit = $8
Units required to be sold = Profit required+Fixed costs/Contribution per unit
291000+193200/8= 60525 units
The correct answer is 6525 units
3. The correct answer is $26
Since Hinge department is having spare capacity, it can transfer the units at variable cost itself which is $26
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