Exam 9: Flexible Budgets and Overhead Analysis

Assume that there is no other use for the capacity now being used to produce the component and the total fixed manufacturing overhead of the company would be unaffected by this decision.If Rogers Company purchases the components rather than making them internally,what would be the impact on the company's annual net operating income?

Pitkin Company produces a part used in the manufacture of one of its products.The unit product cost of the part is $33,computed as follows: An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each.The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier.Assume that direct labour is an avoidable cost in this decision.Based on these data,the per unit dollar advantage or disadvantage of purchasing the parts from the outside supplier would be:

Jimbob Co.is considering offering each of the three products the company manufactures at two levels - "Standard" and "Advanced".Currently all products are processed to the "Standard" level and all products manufactured at this level can be sold.Management believes that it will be possible to generate additional sales revenue and profits by further processing some of units of the "Standard" level products to the "Advanced" level.Fixed costs will not change in total.In making the decision whether it should process products further which decision rule should be followed?

Manor Company plans to discontinue a department that has a contribution margin of $24,000 and $48,000 in fixed costs.Of the fixed costs,$21,000 cannot be avoided.The effect of this discontinuance on Manor's overall net operating income would be a(an):

Jimbob Co.manufactures three products from a common input in a joint processing operation.All units of all three products can be sold at the split-off point.Alternatively all three products can be further processed and all units after further processing can be sold.Information about the products is as follows: