Exam 6: Relevant Information and Decision Making: Operational Decisions

Future costs are relevant if they are the same under all feasible alternatives.

Nonfinancial information can influence decisions to add or delete products.

Orange Manufacturing Company produces three products using a joint process that accumulates $25,000 in joint costs.The products, A, B, and C, can be sold at split?off or processed further and then sold.The production level for each product is 10,000 units.The following unit information is also available: Separable Processing Sales Value Costs after Sales Value Product at Split-off Split-off at Completion \ 12 \ 9 \ 21 10 4 17 15 6 19 If product A is processed beyond the split-off point, profit will _____.

Variable expenses are divided into avoidable and unavoidable costs.

Depreciation on new equipment is relevant in deciding whether to keep or replace equipment.

The gain or loss on the disposal of equipment is determined by _____.

Opportunity cost depends on alternatives available.

Heating and air conditioning are examples of common costs of all departments in a retail store.

Equipment's book value is the original cost plus depreciation.

The allocation of joint costs should affect the decision to sell or process further.

Relevant costs may include fixed avoidable costs.

Future costs are relevant in decision making when they _____.

Lakers Company manufactures a part for its production cycle.The costs per unit for 5,000 units of this part are as follows: Direct materials \3 Directlabor 5 Variable factory overhead 4 Fixed factory overhead 2 Total costs \1 4 The fixed factory overhead costs are unavoidable.Assume that Lakers Company has been offered 5,000 units of the part from another producer for $14 each.The facilities currently used could be used to make 5,000 units of a product that would contribute $5 a unit to fixed expenses.No additional fixed costs would be incurred.Lakers Company should _____.

Relevant costs are only variable.

Match Company produces a part that is used in the manufacture of one of its products.The costs associated with the production of 5,000 units of this part are as follows: Direct materials \ 108,000 Directlabor 156,000 Variable factory overhead 72,000 Fixed factory overhead 168,000 Total costs \ 504,000 Of the fixed factory overhead costs, $72,000 are avoidable.Match Company has offered to sell 5,000 units of the same part to Match for $86.40 per unit.Assuming there is no other use for the facilities, Match Company should _____.

Opportunity cost is specifically mentioned in _____.

Mary is considering leaving her current position to open an ice cream shop.Mary's current salary is $77,000.Annual ice cream shop revenue and costs are estimated at $260,000 and $210,000, respectively._____ is the opportunity cost of remaining employed.

Costs that will not continue if an ongoing operation is changed or deleted

Nestle Company paid $130,000 for a machine used to mill oats.The annual contribution margin from oat sales is $60,000.The machine could be sold for $80,000.The opportunity cost of producing wheat flour is _____.

In a decision to keep or replace existing equipment, _____ is a false statement.