Exam 13: Short-Run Decision Making: Relevant Costing

Mattson Construction charges each customer a price equal to the cost of direct materials,direct labor,and overhead plus 40%.Job #1845 included the following costs: What is price charged for Job 1845?

_______________________ focuses on whether a product should be processed beyond the split-off point.

In the presence of multiple constraints the solution is considerably more complex than for one constraint and requires a technique known as ____________________.

In deciding the optimal mix of products that use a constrained resource,it is important to determine the contribution margin per unit of scarce resource.

Future costs that differ across alternatives are relevant costs.

Limited resources or a limited demand for a product are examples of ______________.

Figure 13-6. Autry Company manufactures veterinary products.One joint process involves refining a chemical (dactylyte)into two chemicals - dac and tyl.One batch of 5,000 gallons of dactylyte can be converted to 2,000 gallons of dac and 3,000 gallons of tyl at a total joint processing cost of $12,000.At the split-off point,dac can be sold for $3 per gallon and tyl can be sold for $4 per gallon.Autry has just learned of a new process to convert dac into prodac.The new process costs $4,000 and yields 1,700 gallons of prodac for every 2,000 gallons of dac.Prodac sells for $5 per gallon. Refer to Figure 13-6.What is Autry's profit from refining one batch of dactylyte if both dac and tyl are sold at the split-off point?

Foster Industries manufactures 20,000 components per year.The manufacturing cost of the components was determined as follows: If the component is not produced by Foster,inspection of products and provision of power costs will only be 10% of the current production costs; moving materials costs and setting up equipment costs will only be 50% of the production costs; and supervision costs will amount to only 40% of the production amount.An outside supplier has offered to sell the component for $25.50. What is the effect on income if Foster Industries purchases the component from the outside supplier?

In short-run decision making,the alternative with the lowest overall cost is always chosen.

Veblen Company manufactures a variety of athletic shoes: basketball,running,and tennis.Sales of the tennis shoes have fallen off.Veblen is considering several options: 1)drop the tennis shoe line; 2)replace the tennis shoe line with golf shoes; 3)retool the tennis shoe line to make "Airtennies." Price and cost data are as follows: If the tennis shoe line is dropped,the $50,000 fixed cost is totally avoidable.

Piersall Company makes a variety of paper products.One product is 20 lb copier paper,packaged 5,000 sheets to a box.One box normally sells for $18.A large bank offered to purchase 3,000 boxes at $14 per box.Costs per box are as follows: No variable marketing costs would be incurred on the order.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable. Should Piersall accept the order?

Victor's Detailing customers would be willing to pay $57 per detail.The company requires a 40% profit on each job.The average job would cost $30. Victor's uses target costing.Victor's Detailing should:

Stadium Company charges cost plus 60%.If the price of an item is $260,what is the item's cost?

Irrelevant costs are costs that are the same for more than one alternative.