Exam 17: Activity Resource Usage Model and Tactical Decision Making

The U.S. government has set up foreign trade zones (FTZ) that

Tactical decision making relies

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 Administrative 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. Assume there is additional capacity for 60 more units and the firm has to reduce regular customer sales by 40 units in order to contract the special order. There are selling expenses on only the sales to the regular customers. What is the net income if the special order of 100 units is accepted?

Relevant costs and revenues are present costs and revenues that differ across alternatives.

Wallyworld 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

A decision to accept or reject a specially priced order is an example of a __________ decision.

Yankton Industries manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: Direct materials \ 140,000 Direct labor 230,000 Variable manufacturing overhead 80,000 Fixed manufacturing overhead 120,000 Total \ 570,000 An outside supplier has offered to sell the component for $23.50. Yankton Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier. What is the effect on income if Yankton purchases the component from the outside supplier?

The last of the six steps of the tactical decision model is to choose the quickest way to solve the problem.

Sound tactical decision making

Gandolph Company manufactures a product with the following costs per unit at the expected production of 30,000 units: Direct materials \ 4 Direct labor 12 Variable manufacturing overhead 6 Fixed manufacturing overhead 8 The company has the capacity to produce 40,000 units. The product regularly sells for $40. A wholesaler has offered to pay $32 a unit for 2,000 units. If the firm is at capacity and the special order is accepted, the effect on operating income would be

Carmine Company uses 4,000 units of a product each year. The cost of manufacturing one unit at this volume is as follows: Direct materials \ 10.00 Direct labor 14.00 Variable overhead 5.00 Fixed overhead 3.00 Total \ 32.00 An outside supplier has offered to sell Carmine Company unlimited quantities at a unit cost of $30.00. If Carmine Company accepts this offer, it can eliminate 50 percent of the fixed costs assigned to the product. Furthermore, the space devoted to the manufacture of the product would be rented to another company for $18,000 per year. If Carmine Company accepts the offer of the outside supplier, annual profits will:

A purchasing agent has two potential firms from which to buy materials for production. If both firms charge the same price, the material cost is a(n)

In a keep-or-drop decision, the __________ income or loss determines whether a segment is kept or dropped.

Which of the following is NOT a step in the tactical decision-making process?

Cellestial Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to $200,000. If Frocessed Further Sales Value Additional Product Units Produced at Split-Off Costs Sales Value A1 3,000 \ 10,000 \ 2,500 \ 15,000 B2 5,000 30,000 3,000 35,000 4,000 20,000 4,000 25,000 4 6,000 40,000 6,000 45,000 If Product B2 is processed further, profits will

Which of the following costs is NOT relevant to a special-order decision?

Santa Lucia Industries employs 500 workers in the factory. These workers produced 85,000 units in the preceding year. Due to a special order, the units produced in the current year increased to 95,000 units. However, Santa Lucia produced these units without adding workers. How is that possible?

The following data pertains to the Montrose Company's three products: M N O Unit sales per month Selling price per unit \ 6.00 \ 11.25 \ 7.50 Variable costs per unit 3.00 9.00 7.00 Unit contribution margin \ 3.00 \ 2.25 \ 0.50 Batches 5 10 5 Setups 6 3 1 Difect 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: The operating income for Montrose would be

Scarlet Company produces electronic components for electronic systems. The company sells 10,000 components per year for $15. The capacity is 12,500 units per year. Manufacturing and other costs are as follows: Variable costs per unit: Fixed costs per month: Direct materials \ 4.50 Factory overhead \ 60,000 Directlabor 2.25 Selling and admin. 30,000 Factory overhead Total \ 90,000 Total \ 9.00 Ocher Company has offered a one-year contract to supply the components at a cost of $8.50 per unit. If Scarlet Company accepts the offer, it will be able to rent unused space to an outside firm for $9,000 per year. All other information remains the same. What is the effect on profits if Scarlet Company buys the components from Ocher Company?

Noreaster Company produces a product that has a regular selling price of $360 per unit. At a typical monthly production volume of 2,000 units, the product's average unit cost of goods sold amounts to $270. Included in this average is $120,000 of fixed manufacturing costs. All selling and administrative costs are fixed and amount to $30,000 per month. Noreaster Company has just received a special order for 1,000 units at $240 per unit. The buyer will pay transportation, and the regular selling price will not be affected if Noreaster accepts the order. Assuming Noreaster Company has excess capacity, the effect on profits of accepting the order would be a