The Manager at Frame Manufacturing Reported the Cost to Product

question 34

Multiple Choice

The manager at Frame Manufacturing reported the cost to product Frame A was $22 per unit in 2011 and in 2012 the cost increased to $24 per unit.In 2013,the manager at a local supplier offered to supply Frame A for $20 per unit.For the make-or-buy decision:

• A)incremental revenues are $4 per unit.
• B)incremental costs are $2 per unit.
• C)net relevant costs are $2 per unit.
• D)differential costs are $4 per unit.
• E)None of these are correct.

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Definitions:

Annual Accounting Period

A 12-month period over which a company reports its financial performance, often aligned with the calendar year or fiscal year.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare the ledger for the next period.

Financial Statements

Consolidated documents such as the balance sheet, income statement, and cash flow statement that summarize a company’s financial performance.

Adjusting Entries

journal entries made in an accounting system to update accounts for transactions that have not yet been recorded by the end of a period.