7) Grip Manufacturing currently produces 1,000 tires per month. The following per unit data for 1,000 tires apply for sales to regular customers: Direct materials $30 Direct manufacturing labor 5 Variable manufacturing overhead 8 Fixed manufacturing overhead 12 Total manufacturing costs $55
The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires? A) $110,000 B) $98,000 C) $68,000 D) $88,000 Answer: B
Explanation: B) Total cost of producing 2,000 tires = [($30 + $5 + $8) × 2,000 units] + ($12 × 1,000 units) = $98,000
Diff: 3
Objective: 4
AACSB: Application of knowledge
8) XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?
A) Total manufacturing costs will increase and unit manufacturing costs will stay the same. B) Total manufacturing costs will increase and unit manufacturing costs will decrease.
C) Total manufacturing costs will stay the same and unit manufacturing costs will stay the same. D) Total manufacturing costs will increase and unit manufacturing costs will also increase. Answer: B
Diff: 2
Objective: 4
AACSB: Application of knowledge
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9) Ridez Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers: Direct materials $50 Direct manufacturing labor 8 Variable manufacturing overhead 12 Fixed manufacturing overhead 15 Total manufacturing costs $85
The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000 bicycles. What is the per unit cost of producing 2,000 bicycles? A) $78.50 per unit B) $170 per unit C) $72.50 per unit D) $77.50 per unit Answer: D
Explanation: D) Cost of producing 2,000 bicycles = [($50 + $8 + $12) × 2,000 units] + ($15 × 1,000 units) = $155,000 / 2,000 units = $77.50
Diff: 3
Objective: 4
AACSB: Application of knowledge
Answer the following questions using the information below:
Buildz Manufacturing currently produces 1,000 tables per month. The following per unit data for 1,000 tables apply for sales to regular customers: Direct materials $50 Direct manufacturing labor 10 Variable manufacturing overhead 15 Fixed manufacturing overhead 30 Total manufacturing costs $105
10) The plant has capacity for 3,000 tables and is considering expanding production to 3,000 tables. What is the total cost of producing 3,000 tables? A) $255,000 B) $225,000 C) $175,000 D) $235,000 Answer: A
Explanation: A) [($50 + $10 + $15) × 3,000 units] + ($30 × 1,000 units) = $255,000
Diff: 3
Objective: 4
AACSB: Application of knowledge
22
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11) What is the per unit cost when producing 3,000 tables? A) $58.33 B) $175.00 C) $85.00 D) $125.45 Answer: C
Explanation: C) $255,000 / 3,000 = $85
Diff: 2
Objective: 4
AACSB: Application of knowledge
Answer the following questions using the information below:
Pederson Company reported the following: Manufacturing costs $150,000 Units manufactured 5,000 Units sold 4,700 units sold for $75 per unit Beginning inventory 100 units
12) What is the average manufacturing cost per unit? A) $40.00 B) $42.00 C) $30.00 D) $32.00 Answer: C
Explanation: C) $150,000 / 5,000 = $30.00
Diff: 2
Objective: 4
AACSB: Application of knowledge
13) What is the manufacturing cost for the ending finished goods inventory? A) $12,000 B) $8,000 C) $11,000 D) $5,000 Answer: A
Explanation: A) (100 + 5,000 - 4,700 ) × 30 = $12,000
Diff: 3
Objective: 4
AACSB: Application of knowledge
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Answer the following questions using the information below:
The following information pertains to Razor's Corp: Manufacturing costs $135,000 Units manufactured 15,000 Units sold 12,000 units sold for $15 per unit Beginning inventory $3,500
14) What is the average manufacturing cost per unit? A) $11.00 B) $9.00 C) $11.25 D) $11
Answer: B
Explanation: B) $135,000 / 15,000 = $9.00
Diff: 2
Objective: 4
AACSB: Application of knowledge
15) What is the manufacturing cost for the ending finished goods inventory? A) $42,500 B) $25,500 C) $18,500 D) $30,500 Answer: D
Explanation: D) Ending finished inventory = $3,500 + (15,000 - 12,000) × $9 = $30,500
Diff: 3
Objective: 4
AACSB: Application of knowledge
16) When making decisions for product mix or and pricing, the focus should be on total costs and not unit costs.
Answer: TRUE
Diff: 1
Objective: 4
AACSB: Analytical thinking
17) Although unit costs are regularly used in financial reports and for making product mix and pricing decisions, managers should think in terms of total costs rather than unit costs for making decisions. Answer: TRUE
Diff: 2
Objective: 4
AACSB: Analytical thinking
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