SOLUTION: Accounting Questionnaire – Studypool

Question 1 (1 point)
A company produces a single product, W9. Its information is given below:
Item
W9
Number of units
330
Selling price per unit at the split off point $11.25
Product W9 can be processed further into product W10 at a cost of $1,000. Product
W10 can then be sold for $24.25 per unit.
How many units of W10 does the company have to sell to justify the further
processing of W9?
Your Answer:
Answer
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Page 1 of 5
Question 2 (1 point)
Sol Ltd. manufactures unfinished chairs that sell for $47.50 each and cost $20 to
make. The company has been considering finishing the chairs, which it could then
sell the chairs for $62.00} each. However, it has been determined that only 7,700
finished chairs could be sold; the other 1,300 chairs would continue to be sold
unfinished.
Costs per chair associated with processing further are:
Direct materials
$5.00
Direct labour
14.50
Variable overhead
2.00
If the company decides to process further, the incremental profit (loss) would be:
Your Answer:
Answer
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Page 2 of 5
Question 3 (1 point)
Culbertson Co. is considering closing down one of its divisions. The division
presently has a contribution margin of $441,000. Overhead allocated to the division
is $1,145,500, of which $261,000 cannot be eliminated.
If this division were discontinued, how much would Culbertson’s pre-tax income
increase (decrease)?
Your Answer:
Answer
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Page 3 of 5
Question 4 (1 point)
A product produced in a joint process can either be sold as is or processed further. If
.
sold as is, 925 kilograms can be sold at $13.25 per kilogram. If processed further,
then only 825 kilograms can be sold at $21.25 per kilogram. The cost to process
further is $2,950.
What is the incremental benefit (cost) of processing further?
Your Answer:
Answer
Question 5 (1 point)
Dunder Ltd. Has two product lines, X and Y. The following information is available:
Account
X
Y
Sales
$9.000
$15,175
Variable costs
5,000
8,625
Fixed costs:
Avoidable
2,075
2,800
Unavoidable
2,000
2,000
Dunder Ltd. is considering discontinuing product line X. This would increase sales of
product line Y by 43% without increasing fixed costs.
If the company does decide to discontinue product line X, operating income will
increase (decrease) by:
Your Answer:
Answer
Question 2
0 / 1 point
Sol Ltd. manufactures unfinished chairs that sell for $47.50 each and cost $20 to make. The company has been considering finishing the
chairs, which it could then sell the chairs for $62.00} each. However, it has been determined that only 7,700 finished chairs could be
sold; the other 1,300 chairs would continue to be sold unfinished.
Costs per chair associated with processing further are:
Direct materials
$5.00
Direct labour
14.50
Variable overhead
2.00
If the company decides to process further, the incremental profit (loss) would be:
Answer:
100,100 X (-53,900)
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Answer:
100,100 % (-53,900)
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To process or not to process further… that is the question. In this case, we’ll see if processing further is beneficial by calculating the incremental profit from
selling each finished chair, and adding up the total change in income for Sol Ltd.
The profit from selling the product immediately must be subtracted from the finished chair’s selling price to find the comparative benefit of selling a finished
product. We’ll also subtract the variable processing costs from this benefit, since the additional costs will reduce Sol’s incremental income from this decision.
Sales benefit = (price of finished chair) – (price of unfinished chair)
Incremental income per unit = (sales benefit) – (direct labour) – (direct materials) – (variable overhead)
Now, all we have to do is find the total incremental profit (or loss) by multiplying this per-unit amount by the total number of finished chairs that Sol would be
able to sell.
Incremental income = (incremental income per unit) x (number of finished chairs sold)

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