# EMBRY MGMT 312 Final Exam /EMBRY MGMT 312 Final Exam /EMBRY MGMT 312 Final Exam

1. A company is currently operating at 80% capacity producing and 5,000 units. Current cost information relating to this production is shown in the table below.

Per Unit

Sales Price

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\$34

Direct material

\$2

Direct labor

\$3

\$4

\$5
The company has been approached by a customer with a request for a 100-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?
Any amount over \$34 per unit.
Any amount over \$20 per unit.
Any amount over \$14 per unit.
Any amount over \$9 per unit.
Any amount over \$5 per unit.
5,000/.80-5,000=1,250 unit capacity available \$2+\$3=\$9 incremental costs
2. A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):
Uncontrollable cost
Incremental cost
Opportunity cost
Out-of-pocket cost
Sunk cost
3. Alpha Co. can produce a unit of Beta for the following costs:
Direct material \$8
Direct labor 24
Total costs per unit \$72
An outside supplier offers to provide Alpha with all the Beta units it needs at \$60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should:
Buy Beta since the relevant cost to make it is \$72.
Make Beta since the relevant cost to make it is \$56.
Buy Beta since the relevant cost to make it is \$48.
Make Beta since the relevant cost to make it is \$48.
Buy Beta since the relevant cost to make it is \$56.
\$72- (40% x \$40) = \$56 of relevant cost
4. An opportunity cost:
is an unavoidable cost
requires a current outlay of cash
results from past managerial decisions

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