Exam 11: Decision Making With a Strategic Emphasis

The Crown Company must decide whether to make or buy part 128PC.Although Crown's idle equipment could be used to produce up to 10,000 units of the part,the company presently needs only 7,000 units.The following shows the estimated cost of making part 128PC.

The Car Lot is a New York car dealership located in a highly visible area along a prominent highway.Fred Barns,owner of The Car Lot,was deciding how much front-row space along the highway to devote to four different car models.Fred had a maximum front-row space of 200 feet to devote to the four car models.He wanted a minimum of twenty feet and a maximum of eighty feet of front-row space for each car model.Appropriate data on the four car models follow: The sedan model's monthly contribution per 10 feet of front-row space is calculated to be

To make a special order decision,managers need critical information about all the following except:

Depreciation is a relevant cost in a decision only in the context of:

The Car Lot is a New York car dealership located in a highly visible area along a prominent highway.Fred Barns,owner of The Car Lot,was deciding how much front-row space along the highway to devote to four different car models.Fred had a maximum front-row space of 200 feet to devote to the four car models.He wanted a minimum of twenty feet and a maximum of eighty feet of front-row space for each car model.Appropriate data on the four car models follow: The convertible model's monthly contribution per 10 feet of front-row space is calculated to be:

Management accountants are frequently asked to analyze various decision situations including the following: (1)Alternative uses of plant space,to be considered in a make/buy decision. (2)Joint production costs incurred,to be considered in a sell-at-split-off versus a process-further decision. (3)Research and development costs incurred in prior months,to be considered in a product-introduction decision. (4)The cost of a special device that is necessary if a special order is accepted. (5)The cost of obsolete inventory to be considered in a keep-versus-disposal decision. The costs described in situations 2,3,and 5 above are:

The Car Lot is a New York car dealership located in a highly visible area along a prominent highway.Fred Barns,owner of The Car Lot,was deciding how much front-row space along the highway to devote to four different car models.Fred had a maximum front-row space of 200 feet to devote to the four car models.He wanted a minimum of twenty feet and a maximum of eighty feet of front-row space for each car model.Appropriate data on the four car models follow: The contribution margin per SUV is calculated to be:

Triad Children's Center,a non-profit organization,uses relevant cost analysis to determine whether or not new services are desirable.TCC is looking at adding a new educational program for grade school children who are having difficulty with their reading and math skills.The following relevant costs will be incurred if the program is accepted: TCC estimates that a maximum of 40 children will participate in this program in the first year.If TCC decides to implement this program,funding will be received from the City Chamber of Commerce ($50,000)and a local Private University Endowment Fund ($35,000).Calculate the expected surplus or deficit from operations given the above information.

Walman Corp.manufactures products X,Y,and Z from a joint process.Joint costs are allocated on the basis of relative sales value at the split-off point.Additional information is as follows: Which of the three products should be manufactured beyond the split-off point?

The Car Lot is a New York car dealership located in a highly visible area along a prominent highway.Fred Barns,owner of The Car Lot,was deciding how much front-row space along the highway to devote to four different car models.Fred had a maximum front-row space of 200 feet to devote to the four car models.He wanted a minimum of twenty feet and a maximum of eighty feet of front-row space for each car model.Appropriate data on the four car models follow: The contribution margin per truck is calculated to be:

The following cost information pertained to the Violin Division of Stringing Music Co.and was based on monthly demand and sales of 100 units: Assuming that the original cost information pertained to five violins that had been produced in the current period,total relevant cost per unit is:

ZapVideo Inc.produces two basic types of video games,Clash and Slash.Pertinent data follow: There is insufficient labor capacity in the plant to meet the combined demand for both Clash and Slash. Both products are produced through the same production departments.In view of the labor shortage,which of the two products is most profitable,and how much is the profit per hour?

Which one of the following issues would least likely be addressed during the regular review of product profitability?

SportsCards Inc.manufactures baseball cards sold in packs of 10 in drugstores and grocery stores throughout the country.It is the second leading firm in an industry with four major firms.SportsCards has been approached by Zip Cereal Inc. ,which would like to order a special edition of cards to use as a promotion with its new cereal.SportsCards would be solely responsible for designing and producing the cards.Zip wants to order 30,000 sets and has offered $25,500 for the total order.Each set will consist of 30 cards.SportsCards currently produces cards in sheets of 120.

The Tee Box is a golf shop inside the clubhouse of a North Carolina golf course.Derek Dunlop,owner of the Tee Box,was deciding how much shelf space to devote to four different golf ball types.Derek had a maximum front shelf space of fifteen feet to devote to the four golf ball types.He wanted a minimum of three feet and a maximum of seven feet of front shelf for each golf ball type.Appropriate data on the four ball types follow: The daily contribution per foot of front shelf space for Durable is calculated to be:

In a make or buy decision:

A truck,costing $25,000 and uninsured,was wrecked the very first day it was used.It can either be disposed of for $5,000 cash and be replaced with a similar truck costing $27,000,or rebuilt for $20,000 and be brand new as far as operating characteristics and looks are concerned.The best choice provides a net savings of:

The Tee Box is a golf shop inside the clubhouse of a North Carolina golf course.Derek Dunlop,owner of the Tee Box,was deciding how much shelf space to devote to four different golf ball types.Derek had a maximum front shelf space of fifteen feet to devote to the four golf ball types.He wanted a minimum of three feet and a maximum of seven feet of front shelf for each golf ball type.Appropriate data on the four ball types follow: The contribution margin per case for Straight is calculated to be:

Old Vine Vineyard produces premium wine.Its success in the industry is due to its quality,although all of its customers,wine shops and specialty grocery stores,are very cost conscious and negotiate for price cuts on all large orders.Noting that the wine industry is becoming increasingly competitive,Old Vine is looking for a way to meet the challenge.It is negotiating with Eastern Seasons,a regional specialty grocery store,to purchase a large order of wine.Old Vine is currently producing at under-capacity and would like to keep its production facilities,gaining better economies of scale by increasing production.Eastern Seasons has agreed to a large order but only at a price of $39 per bottle.The special order can be purchased in one batch with available capacity.Old Vine prepared these data: Next month's operating information (per unit,for 10,000 bottles,made in 10 batches of 1,000 each)

The Sand Cruiser is a takeout food store at a popular beachside resort.Teresa Texton,owner of the Sand Cruiser,was deciding how much refrigerator space to devote to four different beverages.Appropriate data on the four beverages follow: The contribution margin per case for Grape Juice is: