Exam 17: Activity Resource Usage Model and Tactical Decision Making

If a firm is at full capacity, the minimum special order price must cover

Information about three joint products follows: Anticipated production 5,000 1,000. 2,000. Selling price/lb. at split-off \ 10 \ 30 \ 16 Additional processing costs/lb. after split-off (all variable) \ 6 \ 12 \ 24 Selling price/lb. after further processing \ 20 \ 40 \ 50 The cost of the joint process is $60,000. Which of the joint products should be sold at split-off?

An important qualitative factor to consider regarding a special order is the

Foreign trade zones are set up by the U.S. government to facilitate warehousing and/or manufacturing for companies.

Describe the steps in the decision-making process. What is the role of qualitative factors in tactical decision-making?

Tactical decision making consists of choosing among alternatives with an immediate or limited end in view.

Senior Company currently buys 35,000 units of a part used to manufacture its product at $40 per unit. Recently the supplier informed Senior Company that a 20 percent increase will take effect next year. Senior has some additional space and could produce the units for the following per-unit costs (based on 35,000 units): Direct materials \ 16 Direct labor 12 Variable overhead 12 Fixed overhead 10 Total \ 50 If the units are purchased from the supplier, $200,000 of fixed costs will continue to be incurred. In addition, the plant can be rented out for $20,000 per year if the parts are purchased externally. Required: Should Senior Company buy the part externally or make it internally?

Sound tactical decision making is limited to achieve small objectives.

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

The first of the six steps of the tactical decision model is to recognize and define the problem.

A keep-or-drop decision uses irrelevant cost analysis to determine whether to continue or discontinue a segment or line of business.

Committed resources are acquired in advance of usage, through implicit contracting.

Firms may be asked to accept a special order of their product for a reduced price if

A tariff is a tax on exports levied by the federal government.

A special-order decision focuses on whether a specially priced order should be accepted or rejected.

Future costs which differ across alternatives are called __________ costs.

The following data pertains to the Montrose Company's three products: Unit sales per month Selling price per unit \ 6.00 \ 11.25 \ 7.50 Variable costs per unit Unit contribution margin \ 3.00 \ 2.25 \ 0.50 Batches 5 10 5 Setups 6 3 1 Direct fixed costs Advertising \ 3,000 \ 2,000 \ 1,000 Supervision 5,000 5,000 5,000 Common fixed costs Inspecting products (\ 10,000) Materials handling (\ 4,000) Customer service (\ 5,000) Plant depreciation (\ 6,000) General administration (\ 8,000) When Montrose converted over to ABC it discovered the following: Inspecting products - 20\% of the inspection activity was unused. The inspections used were based on the number of batches produced. Materials handling - 10\% of the materials handling activity was unused. The materi als handling activi ty used was based on the number of production runs. Customer service - 50\% of the customer service activity was unused. The usage was given as follows: M 1,000,N1000,0500 facility level cost General administration - facility level cost The product margin for product M using ABC would be

Zildjian Corporation manufactures a single product with the following unit costs for 1,250 units: Direct materials \ 2,300 Direct labor 960 Factory overhead (30\% variable ) 1,800 Selling expenses (50\% variable ) 900 Admini strative expenses (10\% variable) 840 Total per unit \ 6,800 Recently, a company approached Zildjian Corporation about buying 100 units for $5,100 each. Currently, the models are sold to dealers for $7,900. Zildjian Corporation's capacity is sufficient to produce the extra 100 units. No additional selling expenses would be incurred on the special order. How much will income change if the special order is accepted?

Which of the following factor is irrelevant regarding a special order?

Wannabee Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: Direct materials \ 12 Direct labor 36 Variable manufacturing overhead 18 Fixed manufacturing overhead 24 The company has the capacity to produce 90,000 units. The product regularly sells for $120. If a wholesaler offered to buy 4,500 units for $100 each, the effect of the special order on income would be a