Exam 8: Using Accounting Information to Make Managerial Decisions

If a special order is being considered when the product normally sells for $10, and relevant costs are $6 to produce a unit and $2 to sell the unit, which of the following decisions is the most likely to be chosen?

Which of the following is not one of the top ten reasons companies outsource their operations?

The first step in making any decision is to consider all available alternatives.

In deciding whether to eliminate a segment of a business, an important issue is the identification of common costs.Answer the following questions relating to common costs. a.What is a common fixed cost? b.Is a common fixed cost considered relevant? c.Give two examples of common fixed costs. d.What happens to common fixed costs if a segment is eliminated?

In evaluating whether or not to accept a special order, decision makers need to consider only quantitative effect as this is the impact on profit.

Which of the following would least likely be a relevant cost in a special order of expensive clocks?

Which of the following is not a qualitative issue that must be considered before reaching a decision to outsource?

The Theory of Constraints was developed to maximize the performance of a value chain.According to the theory, five steps are required to maximize and improve the performance of a value chain. Required: a.List the five steps. b.Define the two terms bottleneck process and throughput contribution.Indicate how these terms are related to the theory of constraints.

ABC Company manufactures sleeping bags.It has the capacity to produce 6,000 sleeping bags a year, but only produced 5,700 bags that could be sold because 5% of the bags had zippers that were defective.Under the theory of constraints, which of the following would be the most likely action to eliminate the problem of defective zippers?

The formula for computing the contribution per constrained resource is

Offshoring is another term for outsourcing.

Toyota, a Japanese company, has a manufacturing plant in Canton, Mississippi.If Toyota were to contract with Ford Motor Company to manufacture its autos at a Ford plant in the United States, this would be an example of

Sienna Company produces earrings, bracelets, and necklaces that are in high demand.Following is information for each of these products: Sienna has 2,000 machine hours available each month.Demand for each item exceeds Sienna's capacity to produce the item.In order to maximize the company's total contribution margin, in what sequence should Sienna fill orders for the three products?

Sunk cost are classified as

Brandon, Inc.is a consulting firm headquartered in Dallas.Trish Hardin, CEO of the company plans to attend a professional conference in Atlanta where she intends to network in the pursuit of business.She enjoys shopping and dining in Atlanta and is looking forward to the trip.She registered for the conference and made hotel and airfare reservations six weeks ago.Her airline ticket and registration fee are non-refundable, but it is not too late to cancel her hotel room.The day before the conference, a company executive from El Dorado calls and wishes to meet with Trish the next day regarding a consulting project.If Trish chooses to make the trip to El Dorado, she will drive.Both trips will require an overnight stay.Trish does not have a prediction of how much revenue either trip may generate.Costs related to the two trips are as follows: Required: a.Which of the above costs are not relevant? b.Without considering qualitative factors, which alternative will Trish choose? Why? c.What are three factors other than costs that Trish should consider?

The Theory of Constraints seeks to maximize throughput contribution, which equals sales revenue less direct materials cost.

Unavoidable costs are incurred under all alternatives and are always relevant.

Logan Corporation is considering a eliminating a department that has incurred losses over the past several years.The department has a contribution margin of $32,000 per year.The fixed costs charged to the department total $37,000.$15,000 of the fixed costs is avoidable.If the department is eliminated, what would be the effect on the corporation's operating income?

Accepting special orders may produce additional revenues but may also result in some negative consequences.Discuss the quantitative and qualitative factors that impact the decision to accept a special order.

Ron Jensen, the controller of Inca Industries, has prepared an analysis to help management determine whether one of Inca's departments should be eliminated.The department's contribution margin is $44,000.The fixed expenses charged to the department total $75,000.Of the fixed expenses, Jensen estimates that $36,000 of those expenses would be eliminated if the department were discontinued.Based on Jensen's analysis, if the department is eliminated, Inca's overall operating income would