Exam 17: Activity Resource Usage Model and Tactical Decision Making

Information about three joint products follows: Anticipated production 12,000 8,000 7,000 Selling price/lb. at split-off \ 16 \ 26 \ 48 Additional processing costs/lb. after split-off (all variable) \ 8 \ 20 \ 20 Selling price/lb. after further processing \ 20 \ 40 \ 70 The cost of the joint process is $140,000. If the firm is currently processing all three products beyond split-off, the firm's income would be

Which of the following costs is relevant to a make-or-buy decision of a particular part of a product?

The use of relevant cost data to identify the alternative that provides the greatest benefit to the organization describes

Information about three joint products follows: Anticipated production 12,000 8,000 7,000 Selling price/lb. at split-off \ 16 \ 26 \ 48 Additional processing costs/lb. after split-off (all variable) \ 8 \ 20 \ 20 Selling price/lb. after further processing \ 20 \ 40 \ 70 The cost of the joint process is $140,000. Which of the joint products should be processed further?

Modesto Company produces CD Players for home stereo units. The CD Players are sold to retail stores for $30. Manufacturing and other costs are as follows: Variable costs per unit: Fixed costs per month: Direct materials \ 9.00 Factory overhead \ 120,000 Direct labor 4.50 Selling and admin. 60,000 Factory overhead 3.00 Total \ 180,000 Distribution 1.50 Total \ 18.00 The variable distribution costs are for transportation to the retail stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year. A San Diego wholesaler has proposed to place a special one-time order of 10,000 units at a reduced price of $24 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of $3,000. All other information remains the same as the original data. What is the effect on profits if the special order is accepted?

Menagerie Products had the following unit costs: Direct materials \ 24 Direct labor 10 Variable factory overhead 8 Fixed factory overhead (allocated) 18 A one-time customer has offered to buy 900 units at a special price of $47 per unit. Assuming that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit (loss) will be generated from the special order?

Cerise Corporation manufacturers a part for its production cycle. The costs per unit for 5,000 units of this part are as follows: Direct materials \ 16 Direct labor 20 Variable overhead 8 Fixed overhead 16 Total \ 60 Jade Company has offered to sell Cerise Corporation 5,000 units of the part for $56 per unit. If Cerise Corporation accepts Jade Company's offer, total fixed costs will be reduced to $30,000. Which of the following is correct decision and correct increase in profit?

Outsourcing refers to the move of a business function to another company, either in or out of the U.S.

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 Inspecting products 60,000 Providing power 30,000 Providing supervision 40,000 Setting up equipment 60,000 Moving materials 20,000 Total \ 580,000 If the component is not produced by Yankton, inspection of products and provision of power costs will only be 10 percent of the production costs; moving materials costs and setting up equipment costs will only be 50 percent of the production costs; and supervision costs will amount to only 40 percent of the production amount. An outside supplier has offered to sell the component for $23.50. What is the effect on income if Yankton Industries purchases the component from the outside supplier?

Which of the following statements is TRUE when making a decision between two alternatives?

Which of the following is NOT a way that companies might reduce tariffs?

Areas that are physically on U.S. soil but considered to be outside U.S. commerce are called __________ zones.

If there is excess capacity, the minimum acceptable price for a special order must cover

Davidian Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are $120,000. Other relevant data are as follows: Product Sales Value at Split-Off Additional Processing Costs Sales Value of Final Froduct W \ 40,000 \ 60,000 \ 80,000 X \ 12,000 \ 4,000 \ 20,000 Y \ 20,000 \ 32,000 \ 120,000 Z \ 28,000 \ 20,000 \ 32,000 \ 100,000 \ 116,000 \ 252,000 Processing Y further will cause profits to

Past cost __________ represents an allocation of a cost already incurred.

Maldovar Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achieving the expected results. The following information is available: Expected maintenance costs of new machine \ 12,000 per year Purchase price of existing machine \ 150,000 Expected cost savings of new machine \ 20,000 per year Expected maintenance costs of existing machine \ 8,000 per year Resale value of existing machine \ 35,000 Which of these items is IRRELEVANT?

Albatross Products had the following unit costs: Direct materials \ 24 Direct labor 10 Variable factory overhead 8 Fixed factory overhead (allocated) 18 A one-time customer has offered to buy 2,000 units at a special price of $48 per unit. Because of capacity constraints, 1,000 units will need to be produced during overtime. Overtime premium is $8 per unit. How much additional profit (loss) will be generated by accepting the special order?

The following information pertains to Salamandre Company's three products: $\begin{array}{lrrr}&A&B&C\\\text { Unit sales per year } & 250 & 400 & 250 \\\text { Selling price per unit } & \$ 9.00 & \$ 12.00 & \$ 10.00 \\\text { Variable costs per unit } & 3.60 & 9.00 & 11.00\\\text { Unit contribution margin } & \$ 5.40 & \$ 3.00 & \$(1.00) \\\text { Contribution margin ratio } & 60 \% & 25 \% & (10) \%\end{array}$ Assume that product C is discontinued and the extra space is rented for $300 per month. All other information remains the same as the original data. Annual profits will

Sunk costs are

One of Maersk cargo ships hit an iceberg and sank. In deciding whether or not to salvage the ship, its book value is a(n)