NF Toy Company Is Unsure of Whether to Sell Its

question 60

Multiple Choice

NF Toy Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and NF Toy would sell it for $52. The cost to assemble the product is estimated at $17 per unit and the company believes the market would support a price of $68 on the assembled unit. What decision should NF Toy make?

• A) Sell before assembly, the company will be better off by $1 per unit.
• B) Sell before assembly, the company will be better off by $16 per unit.
• C) Process further, the company will be better off by $23 per unit.
• D) Process further, the company will be better off by $11 per unit.

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Definitions:

Job-Order Costing

An accounting methodology used to assign costs to specific jobs or batches, enabling the calculation of profitability per job.

Machine-Hours

A measure of production time, calculated by multiplying the number of machines by the hours they are in operation.

Predetermined Overhead Rate

The rate calculated prior to the accounting period that is used to apply overhead costs to products or job orders, based on estimated costs and activity levels.

Machine-Hours

A measure of production time or activity, where one machine-hour represents the operation of a machine for one hour.