Exam 4: Fundamentals of Cost Analysis for Decision Making

The Winwood Company manufactures two products: Q and T.The costs and revenues are as follows: Total demand for Product Q is 14,000 units and for Product T is 9,000 units.Machine time is a scarce resource.During the year,54,000 machine hours are available.Product Q requires 5 machine hours per unit,while Product T requires 3 machine hours per unit. How many units of Products Q and T should Winwood produce?

A decision must involve at least two alternative courses of action.

The operations of Gadwell Corporation are divided into the Blink Division and the Blur Division.Projections for the next year are as follows: Operating income for Gadwell Corporation as a whole if the Blur Division were dropped would be

The theory of constraints focuses on maximizing throughput contribution margin while minimizing all of the following except

Peak load pricing is the practice of setting prices lowest when the quantity demanded for the product approaches the physical capacity to produce it.

Winton Inc has 12,000 machine hours available each month.The following information on the company's four products is available: If market demand exceeds the available capacity,in what sequence should orders be filled to maximize the company's profits?

The following information relates to a product produced by Ashland Company: Fixed selling costs are $1,000,000 per year.Although production capacity is 500,000 units per year,Ashland expects to produce only 400,000 units next year.The product normally sells for $80 each.A customer has offered to buy 60,000 units for $60 each.The customer will pay the transportation charge on the units purchased.If Ashland accepts the special order,the effect on income would be a

Agreement among business competitors to set prices at a particular level:

Explain the difference between full costs and differential costs.

The Rush Company manufactures two products: L and M.The costs and revenues are as follows: Total demand for Product L is 2,000 units and for Product M is 1,000 units.Machine time is a scarce resource.During the year,36,000 machine hours are available. a.How many units of Products L and M should Rush produce?

The Buchanan Company has gathered the following information for a unit of its most popular product: The above cost information is based on 10,000 units.A distributor has offered to buy 2,000 units at a price of $32 per unit.This special order would not disturb regular sales.Special packaging and other selling expenses would be an additional $0.50 per unit for the special order.If the special order is accepted,Buchanan's operating profits will increase by:

The Blade Division of Axe Company produces hardened steel blades.One-third of Blade's output is sold to the Forestry Products Division of Axe; the remainder is sold to outside customers.Blades' estimated operating profit for the year is: The Forestry Division has an opportunity to purchase 10,000 blades of the same quality from an outside supplier on a continuing basis.The Blade Division cannot sell any additional products to outside customers.Should the Axe Company allow its Forestry Division to purchase the blades from the outside supplier at $1.25 per unit?

The theory of constraints focuses on determining the optimal product mix when one or more resources restrict the attainment of a goal or objective.

When deciding whether or not to accept a special order,a decision-maker should focus on differential costs instead of full costs.

Lerner Inc has 6,600 machine hours available each month.The following information on the company's three products is available: If market demand exceeds the available capacity,in what sequence should orders be filled to maximize the company's profits?

The period of time over which capacity will be unchanged is

Differential costs are (CMA adapted)

Short-run decisions often have long-run implications.

A target cost is computed as

The practice of setting prices highest when the quantity demanded for the product approaches capacity: