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Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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Use the following information for questions 19 and 20 Queen Co. produces two products, A and B. An A unit sells for $60 and costs $20 of direct labor, $10 of direct materials and $5 of variable manufacturing overhead to produce. $10 of fixed overhead is allocated to the product from machinery used to produce both products. Queen has the capacity to produce 20,000 units a month and currently produces 15,000 units. 19) A new customer has requested an order of 1,000 A units at $50 a unit. Queen should A) Reject the order because the price is not $60 B) Accept the order because it would only cost $35 a unit to produce them and Queen would make $15 a unit C) Reject the order because the average cost to produce an A unit is $45 and Queen would only make $5 a unit D) Tell the customer to go place the order at King Co, Queen’s competitor 20) In Queen’s decision the fixed costs were: A) Relevant to the decision because they were allocated to the products B) Relevant to the decision because they had already been purchased C) Not relevant to the decision because excess capacity existed and the fixed costs would not change D) Reason enough to reject the order

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