Solutions

Practice Problems Chapter 14 Managerial Accounting Spring 2012 Solutions to In-class Problems Chapter 14 1. The City of Miami is about to convert an aging fire truck with a naked fomite in an effort to bear maintenance and other direct be. Which of the following items, all tie in to the transaction, would non be considered in the finale? A. Purchase outgo of the new vehicle. B. Purchase price of the grey vehicle. C. Savings in operating be as a result of the new vehicle. D. Proceeds from disposal of the old vehicle. E. Future depreciation on the new vehicle. assist: B The barter for price of the old vehicle is not applicable to the decision and will not be considered because it is a sunk cost that had been incurred in the past. 2. A redundant order generally should be original if: A. its taxation exceeds allocated frigid costs, unheeding of the variable costs associated with the order. B. pointless efficiency exists and the re venue exceeds all variable costs associated with the order. C. profusion subject matter exists and the revenue exceeds allocated fixed costs. D. the revenue exceeds total costs, regardless of for sale capacity. E. the revenue exceeds variable costs, regardless of available capacity.

Answer: B The revenues costs that will be considered in case of the particular(a) order are revenues, variable costs and fixed costs (only if incremental fixed costs have to be incurred). If the ladened has excess capacity, it need not incur any analogue fixed costs to fulfill the order and thus, the only items relevant are revenues and variable costs. 3. Donnelly, a division of Dakota E nterprises, currently makes 100,000 units of! a product that has created a number of manufacturing problems. Donnellys costs follow. Manufacturing costs: covariant Fixed Allocated corporate administrative cost $420,000 150,000 70,000 If Donnelly were to discontinue production, fixed manufacturing costs would be reduced by 80%. The...If you requisite to get a full essay, order it on our website: OrderEssay.net

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