Question 71. Are the materials costs and processing costs relevant in the choice

71. Are the materials costs and processing costs relevant in the choice between alternatives A and B? (Ignore the equipment rental and occupancy costs in this question.)

A) Both materials costs and processing costs are relevant

B) Neither materials costs nor processing costs are relevant

C) Only processing costs are relevant

D) Only materials costs are relevant

72. What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?

A) $105,000

B) $23,000

C) $128,000

D) $116,500

73. Are the materials costs and processing costs relevant in the choice between alternatives X and Y? (Ignore the equipment rental and occupancy costs in this question.)

A) Neither materials costs nor processing costs are relevant

B) Only processing costs are relevant

C) Only materials costs are relevant

D) Both materials costs and processing costs are relevant

74. What is the differential cost of Alternative Y over Alternative X, including all of the relevant costs?

A) $132,000

B) $119,000

C) $145,000

D) $26,000

75. Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be:

A) $30,000 decrease

B) $10,000 increase

C) $22,000 decrease

D) $18,000 increase

76. Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent to discontinuing Doombugs or continuing the production and sale of Doombugs?

A) 20,000 units

B) 18,000 units

C) 6,000 units

D) 4,000 units

77. Suppose that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a $16,000 increase in the contribution margin received from these other toys. If all other conditions are the same, the change in annual operating income from discontinuing the production and sale of Doombugs would be:

A) $6,000 decrease

B) $14,000 increase

C) $2,000 decrease

D) $28,000 increase

78. Suppose again that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a $16,000 increase in the contribution margin received from these other toys. At what selling price per Doombug should Draper be indifferent (on economic grounds) between dropping the Doombug or continuing its production and sale? (All other conditions remain the same, including annual sales of 15,000 units of the Doombug toy.)

A) $8.33

B) $9.25

C) $9.60

D) $10.70

79. According to the company’s accounting system, what is the net operating income earned by product D74F?

A) ($58,000)

B) ($440,000)

C) $58,000

D) $440,000

80. What would be the effect on the company’s overall net operating income if product D74F were dropped?

A) Overall net operating income would increase by $226,000.

B) Overall net operating income would increase by $58,000.

C) Overall net operating income would decrease by $226,000.

D) Overall net operating income would decrease by $58,000.

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