Exam 4: Short-Term Decision Making

The salary of an executive who decides to quit her job and return to school full time is a(n):

If only the variable cost decreases the breakeven point

The change in total cost,if one alternative is implemented instead of another,is referred to as:

Two firms,Alpha and Omega,had the same sales (units and dollars),total costs,and operating income.Alpha's breakeven point is lower than Omega's,however.What could cause this discrepancy?

Managers of Pianissimo Corporation are thinking about eliminating one of their products,MoreGlo.MoreGlo sells for $10 per unit.Unit-related costs are $6,batch-related costs are $400 per batch,and 4 batches of MoreGlo have been required each month.Pianissimo spends $4,000 each month to advertise MoreGlo.Rent and insurance on the factory allocated to MoreGlo total $2,000.If Pianissimo is currently producing and selling 1,500 units of MoreGlo each month,it should not eliminate MoreGlo as long as relevant profit is at least

JJ Corporation manufactures exercise equipment.From this list below indicate whether the item would be classified as DM - direct material,DL - direct labor,MOH - manufacturing overhead,or NP - nonproduct cost. _____ 1.Cost of the cables used in the equipment _____ 2.Set up cost to change from one piece of equipment to another _____ 3.Research cost incurred to develop new types of equipment _____ 4.Salary of the quality control inspector _____ 5.Cost of the oil used to cut metal tubing _____ 6.Insurance on factory equipment _____ 7.Wages of employees who put the equipment together _____ 8.Salary of warehouse foreman where raw material is stored _____ 9.Cost of shipping equipment to customers _____ 10.Shipping cost paid to get raw materials

Which of the following is a short-term operating decision?

The Manhattan Company sells its one and only product for $89.00 per unit.Variable costs per unit amount to $63.50,and total fixed costs are $3,697,500.If management desires a before tax profit of $765,000,total sales revenue must equal:

If fixed costs increase,how will this affect the contribution margin and profit?

Which of the following is the formula for the contribution margin ratio?

When deciding to purchase new equipment the cost of equipment being replaced is a(n):

Nichols Corporation is trying to decide whether to sell its carpet-quality thread or to manufacture the carpets itself.Under which of the following conditions should Nichols sell its thread?

Bug-Ez Corporation manufactures one product,Itch-A-Way,which,when applied to a bug bite soothes the itch.The unit contribution margin for Itch-A-Way is $4.20,while total fixed costs amount to $537,000.Given a selling price of $8.25 per unit,the breakeven point in units is:

Use the following to answer questions JJ Enterprises currently manufactures two products, A and B. It is considering adding a new product, Product C. The following table shows current information for products A and B, as well as projected data for Product C. *NOTE: If Product C is produced, one-fourth of the company's common costs, which are fixed costs, will be allocated to Product C, with one-half and one-fourth allocated to products A and B, respectively. -If JJ Enterprises adds Product C,the total incremental revenue will be:

Kapalua,Inc.manufactures hand held planners.Total fixed costs are $3,950,000,with variable costs per unit of $148.28.The corporate tax rate is 35%.If Kapalua can sell 39,242 units,the per unit selling price necessary to earn an after-tax profit of $1,430,000 must be:

A firm is facing a special-order decision.Explain what revenues and costs are relevant to this decision.

Sit-well Corporation Manufactures an exclusive line of chairs and recliners.Determine whether each of the following would be considered a product or nonproduct cost for Sit-well by using a P to identify the product cost and NP to identify nonproduct costs. _____ A.Cost of the wood used in the chairs. _____ B.Cost of office supplies _____ C.Cost of the fabric used on the recliners. _____ D.Cost of the utilities incurred to run the manufacturing plant. _____ E.The salary of the foreman who oversees the raw materials warehouse _____ _____ F.Depreciation on salespersons' cars _____ G.The president of the corporation's salary _____ H.Wages paid to employees who assemble the chairs _____ I.Cost of the glue used to assemble the chairs _____ J.Cost of shipping the finished product to consumers.

True Fruit,Inc.sells frozen raspberry fruit bars for $2.50 each.The variable cost per bar is $1.35.Total fixed costs are $25,645.The contribution margin ratio is:

Kiechel Employment Counseling,Inc.provides career counseling to unemployed individuals.The standard rate for counseling services is $50 per hour.Variable costs per hour of counseling are $28,while fixed costs are estimated at $10 per hour.Kiechel has been approached by a company who has just laid off 50 employees and would like to provide 4 hours of counseling for each laid-off employee during the coming week.The company is willing to pay $35 per hour. (A)Assuming that Kiechel has ample counselors who have no clients scheduled for the coming week,Kiechel should:

Short-term decision making differs from normal operating decision in two ways, which of the following are the two ways?