Exam 13: Short-Run Decision Making: Relevant Costing

Figure 13-7.Ring Company makes telephones. Currently, Ring makes all components of the telephones in-house. An outside company has offered to supply one component, part number X76, for $12 each. Ring uses 22,000 of these components per year. Costs of X76 are as follows: -Refer to Figure 13-7. Assume that all of the fixed overhead is allocated and cannot be avoided. Should Ring purchase the part from the outside supplier?

A choice between internal and external production is a keep-or-drop decision.

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 13-2. Which of the following is a qualitative factor that might affect ColorPro's decision?

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

The solution of the product mix problem in the presence of multiple constraints requires the use of

The first step in making a short-run decision is to identify alternatives as possible solutions to the problem.

Future costs that differ across alternatives are relevant costs.

Rose Manufacturing Company had the following unit costs: A one-time customer has offered to buy 2,000 units at a special price of $48 per unit. Assuming that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit or loss will be generated by accepting the special order?

Refer to Figure 13-4. What is the contribution margin per hour of machine time for a fancy lamp?

Fixed costs are never relevant.

Pasha Company produced 50 defective units last month at a unit manufacturing cost of $30. The defective units were discovered before leaving the plant. Pasha can sell them "as is" for $20 or can rework them at a cost of $15 and sell them at the regular price of $50. Which of the following is not relevant to the sell-or-rework decision?

Mickey Company manufactures three joint products: X, Y, and Z. The cost of the joint process is $30,000. Information about the three products follows: Required:

In the presence of multiple constraints the solution is considerably more complex than for one constraint and requires a technique known as ____________________.

Linear programming is a special technique that can be used to determine the optimal product mix when there are multiple constraints.

Match each statement with the correct item below. -Special-order decisions

The act of choosing among alternatives with an immediate or limited end in view is termed

A method of determining the cost of a product or service based on the price that customers are willing to pay is called ________________.

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 13-2. Should ColorPro make or buy the part?

Fuller Company makes frames. A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each. Normally, Fuller would charge $90 per frame for this type of order. Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the frames are working at Fuller. Their wages will be paid whether or not the special order is accepted. Fuller's policy is to avoid layoffs to the extent possible. -Which costs of the special order relate to flexible resources?

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. What is Autry's profit from refining one batch of dactylyte if both dac and tyl are sold at the split-off point?