Exam 10: Relevant Information for Decision Making

The management of Hepner Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $100 cost per component was determined as follows: Hepner Industries uses 4,000 components per year. After Goudge Corporation submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Goudge Corporation, Hepner Industries' unused production facilities could be leased to another company for $50,000 per year. Required:

An increase in direct fixed costs could reduce all of the following except

The feasible region for a graphical solution to a profit maximization problem includes

In a linear programming problem, constraints are indicated by

The benefits foregone when one course of action is chosen over another are referred to as ______________________________.

Travers Corporation is working at full production capacity producing 10,000 units of a unique product, RST. Manufacturing costs per unit for RST follow: The unit manufacturing overhead cost is based on a variable cost per unit of $2 and fixed costs of $30,000 (at full capacity of 10,000 units). The non-manufacturing costs, all variable, are $4 per unit, and the selling price is $20 per unit. A customer, Blanding Company, has asked Travers to produce 2,000 units of a modification of RST to be called XYZ. XYZ would require the same manufacturing processes as RST. Blanding Company has offered to share equally the non-manufacturing costs with Travers. XYZ will sell at $15 per unit. Required:

In a special order decision, unavoidable current fixed costs are taken into consideration in setting a sales price.

Maximization of contribution margin is a common objective function in linear programming.

For a particular product in high demand, a company decreases the sales price and increases the sales commission. These changes will not increase

In linear programming, a limiting factor that hampers management's pursuit of an objective is referred to as a ____________________.

Galveston Pipe Corporation The capital budgeting committee of the Galveston Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model. Information on the existing machine and the new model follows: Refer to Galveston Pipe Corporation. The major opportunity cost associated with the continued use of the existing machine is

The outsourcing decision is also referred to as a "make-or-buy" decision.

In linear programming, a surplus variable represents overachievement of minimum requirements.

Costs incurred in the past to acquire an asset are referred to as _________________________.

Information that has a bearing on future events is relevant in the decision-making process.

Which of the following costs would not be accounted for in a company's recordkeeping system?

When making a decision to discontinue an operating segment, allocated common costs are not considered.

Tripoli Corporation manufactures batons. Tripoli can manufacture 300,000 batons a year at a variable cost of $750,000 and a fixed cost of $450,000. Based on Tripoli's predictions, 240,000 batons will be sold at the regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 40 percent discount off the regular price. The unit relevant cost per unit for Tripoli's decision is

The objective function and the resource constraints have the same

Define segment margin and explain why it is a relevant measure of a segment's contribution to overall organizational profitability.