Exam 9: Relevant Information and Decision Making: Production Decisions

Mann Corporation has a joint process, which produces three products, A, B and C. Each product may be sold at split-off or processed further and then sold. Joint processing costs for a year amount to $125,000. Other relevant data are as follows: -Once product A is produced, processing it further will cause profits to

A relevant costing analysis that focuses on whether a product should be processed beyond the split-off point.

Pett Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows: Of the fixed factory overhead costs, $15,000 is avoidable. -Assume that Pett can buy 5,000 units of the part from another producer for $21 each. The current facilities could be used to make 5,000 units of a product that has a contribution margin of $5 per unit. Fixed factory overhead costs to produce this new product would be exactly the same as for the currently produced part. Pett should

A cost that has already been incurred and is irrelevant to the decision-making process.

The Enger Company is contemplating replacing some old equipment. The pertinent information is as follows: -The total relevant costs to consider if the old equipment is replaced are

Make-or-buy decisions can apply to services as well as to products.

Avey Corporation has a joint process which produces three products, M, L and B. Each product may be sold at split-off or processed further and then sold. Joint processing costs for a year amount to $500,000. Other relevant data are as follows: -To maximize profits, which products should Avey process further?

Avey Corporation has a joint process which produces three products, M, L and B. Each product may be sold at split-off or processed further and then sold. Joint processing costs for a year amount to $500,000. Other relevant data are as follows: -Once product M is produced, processing it further will cause profits to

A relevant costing analysis that focuses on keeping or dropping a segment of a business.

Hamilton, Inc. produces three products using a joint process which provides for $350,000 in joint costs. The products X, Y and Z can be sold at split-off or processed further and then sold. The production level for each product is 5,000 units. The following unit information is also available: -To maximize profits, which products should Hamilton process further?

Buckner Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -Which of the data provided in the table is irrelevant?

Opportunity cost is

Peters Company produces a product with the following unit cost. Fixed selling costs are $600,000 per year and variable selling costs are $1.50 per unit sold. Production capacity is 500,000 units per year. However, the company expects to produce only 300,000 units next year. The product normally sells for $15 each. A customer has offered to buy 150,000 units for $10 each. The units would be sold in an area outside the market area currently served. -The incremental cost per unit associated with the special order is

The split-off point is the juncture in manufacturing where the joint products become individually identifiable.

Barker Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows: Of the fixed factory overhead costs, $60,000 is avoidable. -Blass Company has offered to sell 5,000 units of the same part to Barker for $72 per unit. Assuming there is no other use for the facilities, Barker should

Barker Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows: Of the fixed factory overhead costs, $60,000 is avoidable. -Assuming no other use of their facilities, the highest price that Barker should be willing to pay for 5,000 units of the part is

Bovee Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows: The fixed factory overhead costs are unavoidable. -Assume that Bovee can buy 10,000 units of the part from another producer for $120 each. The facilities currently used to make the part could be rented out to another manufacturer for $160,000 a year. Bovee should

A current or future action can always influence the long-run impact of a past outlay.

The Enger Company is contemplating replacing some old equipment. The pertinent information is as follows: -The difference in cost between keeping the old equipment and replacing the old equipment, ignoring income taxes, is

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is