Exam 17: Activity Resource Usage Model and Tactical Decision Making

Hobart Company produces speakers for PA systems. The speakers are sold to retail music 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 music stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year. The speakers are currently unpackaged. Packaging them individually would increase costs by $1.20 per unit. However, the units could then be sold for $33.00. All other information remains the same as the original data. What is the effect on profits if Hobart Company packages the speakers?

Which of the following items would be classified as committed resources (short-term)?

Which of the following statements is true of tactical decisions?

Flexible resources are acquired way ahead of time.

An irrelevant cost is one that is the same for more than one alternative and has no bearing on future decisions.

The following information relates to a product produced by Malkovich Company: Direct materials \ 24 Direct labor 15 Variable overhead 30 Fixed overhead Unit cost \ 87 Fixed selling costs are $500,000 per year, and variable selling costs are $12 per unit sold. Although production capacity is 600,000 units per year, the company expects to produce only 400,000 units next year. The product normally sells for $120 each. A customer has offered to buy 60,000 units for $90 each. The incremental cost per unit associated with the special order is

Tactical decision making includes decisions to make or buy a component.

The following information pertains to the Dallas Churning Company's three products: $\begin{array}{lrrr}&D&E&F\\\text { Unit sales per month } & 900 & 1,400 & 800 \\\text { Selling price per unit } & \$ 6.00 & \$ 11.25 & \$ 7.50 \\\text { Variable costs per unit } & 3.00 & 9.00 & 7.80 \\\text { Unit contribution margin } & \$ 3.00 & \$ 2.25 & \$(0.30)\end{array}$ Assume that the selling price of product F is increased to $8.25 with a reduction in monthly sales to 400 units. Monthly profits will

Yosemite Company produces Blu-Ray Players for home stereo units. The Blu-Ray 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. An Atlanta wholesaler has proposed to place a special one-time order for 7,000 units at a special price of $25.20 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of $6,000. In addition, assume that overtime production is not possible and that all other information remains the same as the original data. What is the effect on profits if the special order is accepted?

A doctor choosing between buying laboratory tests externally or performing the tests in house is an example of a __________ decision.

The cost of acquiring activity capacity is called __________ spending.

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. If Zildjian Corporation wants to increase its profit by $18,000 on the special order, what is the minimum price it should charge per unit?

The following information pertains to Dallas Churning Company's three products: $\begin{array}{lrrr}&D&E&F\\\text { Unit sales per month } & 900 & 1,400 & 800 \\\text { Selling price per unit } & \$ 6.00 & \$ 11.25 & \$ 7.50 \\\text { Variable costs per unit } & 3.00 & 9.00 & 7.80 \\\text { Unit contribution margin } & \$ 3.00 & \$ 2.25 & \$(0.30)\end{array}$ Assume that product F is discontinued and the space used to produce product F is rented for $600 per month. Monthly profits will

How is understanding of committed resources and flexible resources important to the activity resource usage model? How does this relate to relevance?

Which item is NOT an example of a sunk cost?

Leasing or buying a building are examples of __________resources.