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71.      Belize Corporation has a joint process which produces three products: X, Y, and Z. Each product may be sold at split-off or processed further and then sold. Joint processing costs for a year amount to $100,000. Other relevant data are as follows:
                     Separable
                     Processing
                Sales Value     Costs after     Sales Value
          Product     at Split off     Split off     at Completion

     X     $128,000     $16,000     $160,000
     Y     50,000     26,000     76,000
     Z     25,600     20,000     40,000

     In processing Product Z further:

     a.     profits will decrease by $5,600
     b.     incremental profits will exceed incremental costs
     c.     profits will increase by $20,000
     d.     the additional revenue produced will exceed the additional costs

     

72.      Tangerine Manufacturing Company produces three products using a joint process which accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split off or processed further and then sold. The production level for each product is 10,000 units. The following unit information is also available:

                     Separable
                     Processing
               Sales Value     Costs after     Sales Value
          Product     at Split off     Split off     at Completion

          A          $12     $9     $21
          B          10     4     17
          C          15     6     19

     If product A is processed beyond the split-off point, profit will:

     a.     increase by $210,000     
     b.     increase by $120,000
     c.     increase by $90,000     
     d.     stay the same

     
73.      Lemon Manufacturing Company produces three products using a joint process
     that accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split off or processed further and then sold. The production level for each product is 10,000 units. The following unit information is also available:

                     Separable
                     Processing
                Sales Value     Costs after     Sales Value
          Product     at Split off     Split off     at Completion

          A          $12     $9     $21
          B          10     4     17
          C          15     6     19

     Product B:

     a.     should be processed further to increase profits by $70,000
     b.     should be sold at split off to maximize profits
     c.     should be processed further to increase profits by $3 per unit
     d.     can be processed further or sold at split off; it makes no difference.

     

74.      Orange Manufacturing Company produces three products using a joint process which accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split off or processed further and then sold. The production level for each product is 10,000 units. The following unit information is also available:

                     Separable
                     Processing
                Sales Value     Costs after     Sales Value
          Product     at Split off     Split off     at Completion

          A          $12     $9     $21
          B          10     4     17
          C          15     6     19

     To maximize profits, Orange Manufacturing Company should process


 

     a.     product A only     
     b.     product B only
     c.     product C only     
     d.     products A, B, and C


75.      Grape Company produces three products using a joint process which accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split off or processed further and then sold. The production level for each product is 10,000 units. The following unit information is also available:

                     Separable
                     Processing
                Sales Value     Costs after     Sales Value
          Product     at Split off     Split off     at Completion

          A          $12     $9     $21
          B          10     4     17
          C          15     6     19

     Product C should be processed beyond the split-off point because:

     a.     incremental revenues will exceed incremental costs
     b.     incremental costs exceed incremental revenue
     c.     sales value at completion exceeds sales value at split-off
     d.     None of these answers is correct.

     


76.     Dumpster Company produces three products using a joint process which accumulates $25,000 in joint costs. The products, A, B, and C, can be sold at split off or processed further and then sold. The production level for each product is 1,000 units. The following unit information is also available:

                     Separable
                     Processing
                Sales Value     Costs after     Sales Value
          Product     at Split off     Split off     at Completion

          A          $12     $9     $21
          B          10     4     17
          C          15     6     19

If Dumpster Company makes the decisions that maximize profit, Dumpster Company’s net income will be:

     a.     $47,000
     b.     $32,000
          c.     $30,000
     d.     $15,000
     
     

77.      Joint products should be processed beyond the split-off point if:

     a.     incremental expenses exceed incremental revenues
     b.     sale of the product is guaranteed
     c.     additional net revenue exceeds the sales value at split-off
d.     there is a market for the joint products

78.      


 

     a.     Flour
     b.     Chemicals
     c.     Lumber     
     d.     All of these answers are correct.

79.     Manufacturing costs incurred after the split off      are known as:

     a.     joint costs     
     b.     product costs
     c.     split-off costs     
     d.     separable costs


80.      


 

     a.     The joint processing juncture
     b.     The split off point
     c.     The common point
     d.     The significant juncture

81.     


 

     a.     Separable costs     
     b.     Joint costs
     c.     Incremental costs     
d.     Sunk costs

LEARNING OBJECTIVE 4

82.      


 

     a.     Inventory cost     
     b.     Expected future revenues
     c.     Scrap value of inventory     
     d.     Expected future costs

LEARNING OBJECTIVE 5
     
83.      


 

     a.     Cost of old equipment     
     b.     Book value of old equipment
     c.     Depreciation accrued on old equipment
     d.     Future maintenance costs of old equipment

84.      Depreciation is:

     a.     the periodic cost of equipment spread over the future periods in which
          the equipment is expected to be used
     b.     the decline in equipment value due to obsolescence
     c.     the difference between the original cost and current market value
     d.     All of these answers are correct.

85.      Book value is defined as:

     a.     disposal value
     b.     disposal value less accumulated depreciation
     c.     cost less accumulated depreciation
     d.     disposal value less original cost


86.      Samantha Company is considering replacing a machine that is presently used in the production of its product. The following data are available:

                          Replacement
                Old Machine     Machine

          Original cost      $67,000     $54,000
          Useful life in years      13     4
          Current age in years      9     0
          Book value      $32,000     
          Disposal value now      $18,000     
          Disposal value in 5 years      0     0
          Annual cash operating costs      $9,000     $7,000

     


 

     a.     The annual operating cost of the old machine
     b.     The original cost of the replacement machine
     c.     The disposal value of the old machine
     d.     The disposal value in five years

87.      Derwood Company is considering replacing a machine that is presently used in the production of its product. The following data are available:

                          Replacement
                     Old Machine     Machine

          Original cost      $99,000     $88,000
          Useful life in years      9     6
          Current age in years      3     0
          Book value      $33,000     
          Disposal value now      $28,000     
          Disposal value in 5 years      0     0
          Annual cash operating costs      $17,000     $14,000

     


 

     a.     The annual cash operating costs of the old machine
     b.     The annual cash operating costs of the replacement machine
     c.     The disposal value of the old machine
     d.     The original cost of the old machine


88.      Tabitha Company is considering replacing a machine that is presently used in the production of its product. The following data are available:

                          Replacement
                     Old Machine     Machine

          Original cost      $60,000     $35,000
          Useful life in years      10     5
          Current age in years      5     0
          Book value      $25,000     
          Disposal value now      $8,000     
          Disposal value in 5 years      0     0
          Annual cash operating costs      $10,000     $4,000

     The total relevant costs to consider if the old machine is kept are:

     a.     $60,000
     b.     $50,000
     c.     $52,000
     d.     $30,000

     

89.      Major Nelson Company is considering replacing a machine that is presently used in the production of its product. The following data are available:

                          Replacement
                     Old Machine     Machine

          Original cost      $57,000     $35,000
          Useful life in years      17     5
          Current age in years      12     0
          Book value      $39,000     
          Disposal value now      $8,000     
          Disposal value in 5 years      0     0
          Annual cash operating costs      $7,000     $4,000

     The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is:

     a.     $22,000 in favor of keeping the old machine
     b.     $12,000 in favor of keeping the old machine
     c.     $37,000 in favor of replacing the old machine
     d.     $22,000 in favor of replacing the old machine

     


90.      Tony Company is considering replacing a machine that is presently used in the production of its product. The following data are available:

                          Replacement
                     Old Machine     Machine

          Original cost      $295,000     $188,000
          Useful life in years      11     5
          Current age in years      6     0
          Book value      $130,000     
          Disposal value now      $52,000     
          Disposal value in 5 years      0     0
          Annual cash operating costs      $39,000     $24,000

     


 

     a.     The original cost of the replacement machine
     b.     The disposal value of the old machine
     c.     The book value of the old machine
     d.     The annual operating cost of the old machine

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