Question

1)

Lasso Corporation manufactures a variety of appliances which all use Part B89. Currently, Lasso manufactures Part B89 itself. It has been producing 10,000 units of Part B89 annually. The annual costs of producing Part B89 at the level of 10,000 units include the following:

Direct materials	$3.00
Direct labor	$8.10
Variable manufacturing overhead	$4.20
Fixed manufacturing overhead	$3.20
Total cost	$18.50

All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assume Lasso can purchase 10,000 units of the part from the Nadal Parts Company for $20.20 each, and the facilities currently used to make the part could be used to manufacture 10,000 units of another product that would have a $10 per unit contribution margin. If no additional fixed costs would be incurred, what should Lasso do?

	Make the new product and buy the part to earn an extra $8.30 per unit contribution to profit.
	Continue to make the part to earn an extra $6.80 per unit contribution to profit.
	Make the new product and buy the part to earn an extra $5.10 per unit contribution to profit.
	Continue to make the part to earn an extra $8.10 per unit contribution to profit. 2) Panther Tire Corporation manufactures automobile tires. Panther Tire Corporation reported the following budgeted (standard) and actual information last quarter data: Standard direct labor hours per tire 0.25 Standard rate per direct labor hour $17.00 Actual direct labor hours 3,100 Actual total direct labor cost $65,000 Actual number of tires produced 5,000 What is the direct labor efficiency variance for last quarter? $12,300 favorable $31,450 favorable $12,300 unfavorable $31,450 unfavorable 3) The Chilton Corporation specializes in manufacturing one type of desk lamp. Chilton allocates variable manufacturing overhead costs on the basis of machine hours. Chilton budgeted 0.3 machine hours per lamp and allocates overhead at a rate of $1.70 per machine hour. Last year Chilton manufactured 23,000 lamps, used 9,200 machine hours and incurred actual overhead costs of $10,120. What was Chilton's variable manufacturing overhead efficiency variance last year? $3,910 unfavorable $3,910 favorable $5,520 favorable $5,520 unfavorable 3) Which of the following terms is best described as "a measure of profitability computed by dividing the average annual operating income by the amount of the investment"? Accounting rate of return Internal rate of return Discount rate Net present value

Answer 1