Exam 13: Short-Run Decision Making: Relevant Costing

Flexible resources may have unused capacity.

A situation in which management tells divisions that they must reduce costs by 10% is called target costing.

Tyler Company has been approached by a new customer with an offer to purchase 6,000 units of its product KR200 at a price of $11 each. The existing sales would not be affected by this special order. Tyler normally produces 40,000 units but plans to produce and sell 30,000 in the coming year. The normal sales price is $18 per unit. Unit cost information is as follows: If Tyler accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity.

Most short-run decisions require extensive consideration of ___________.

A decision in which a manager needs to determine whether a product line (or segment) should continue or be eliminated is what kind of decision?

Vest Industries manufactures 40,000 components per year. The manufacturing cost of the components was determined as follows: Direct materials \ 5,000 Direct labor 120,000 Variable overhead 45,000 Fixed overhead 60,000 Total \ 300,000 An outside supplier has offered to sell the component for $12.75. Fixed cost will remain the same if the component is purchased from an outside supplier. Vest Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier. What is the effect on income if Vest purchases the component from the outside supplier?

The percentage that is applied to the base cost is known as the _____________.

__________________ have common processes and costs of production up to a split-off point.

The benefit sacrificed when one alternative is chosen over another is called sunk cost.

Match each statement with the correct item below. -Sell-or-process-further decision

Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit.

Information about three joint products follows: The cost of the joint process is $140,000. Which of the joint products should be processed further?

The operations of Grant Corporation are divided into the Fix Division and the Roach Division. Projections for the next year are as follows: Required:

Limited resources and limited demand for a product are generally referred to as

Figure 13-2. ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. -Refer to Figure 13-6. Should Autry process dac further?

The operations of Knickers Corporation are divided into the Pacers Division and the Bulls Division. Projections for the next year are as follows: Operating income for Knickers Corporation as a whole if the Bulls Division were dropped would be

Manning Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are $120,000. Other relevant data are as follows: Which products should Manning process further?

Mattson Construction charges each customer a price equal to the cost of direct materials, direct labor, and overhead plus 40%. Job #1845 included the following costs: What is price charged for Job 1845?

The benefit sacrificed or foregone when one alternative is chosen over another is known as the ____________________.

Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to $200,000. If Product B2 is processed further, profits will