Exam 6: Relevant Information for Decision Making With a Focus

Melissa Company produces and sells a product that has variable costs of $8 per unit and fixed costs of $240,000 per year.If 20,000 units are produced and sold in a year,what is the cost per unit?

Fixed overhead costs that will continue regardless of a make-or-buy decision are ________ to the make-or-buy decision.

Clinton Company manufactures a part for its production cycle.The costs per unit for 10,000 units of the part are as follows: The fixed factory overhead costs are unavoidable.Wilson Company has offered to sell 10,000 units of the same part to Clinton Company for $55 per unit.Assuming no other use for the facilities,Clinton Company should ________.

The most recent income statement for the Strongsville Branch of First Union Bank is presented below: First Union Bank is thinking about eliminating the Strongsville Branch.If the branch is eliminated,First Union Bank's operating income will ________.

The key reasons that companies outsource are to improve the company's focus and reduce operating costs.

Copter Company currently produces a key part at a total cost of $210,000.Annual variable costs are $170,000.Of the annual fixed costs,$10,000 relate specifically to this part.The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part annually for $190,000.The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $30,000 per year.Alternatively,the facilities could be rented out at $60,000 per year.Given all of these alternatives,what is Copter Company's lowest net relevant cost for the part?

Which cost is relevant to an equipment replacement decision?

Cena Corporation has a joint process that produces three products: P,G and A.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $25,000.Other data follows: Processing Product P beyond the split-off point will cause profits to ________.

Olson Company has three departments.Data for the most recent year is presented below: Olson Company is considering eliminating Dept.C because it is operating at a loss. Required: A)Compute the change in operating income if Olson Company eliminates Dept.C and does not replace it. B)Compute the change in operating income if Olson Company eliminates Dept.C and doubles the sales of Dept.T without increasing fixed costs.

Triple Corporation has a joint process that produces two products: A and B.Each product may be sold at the split-off point or processed further and then sold.Joint-processing costs for a year are $25,000. Product A can be sold at the split-off point for $32,000.Alternatively,Product A can be processed further and sold for $40,000.Additional processing costs are $5,000. When deciding whether to sell Product A at the split-off point or to process further,the ________ is NOT relevant.

________ is(are)an example of joint products.

Opportunity costs apply to resources that a company has committed to purchase.

In a make-or-buy decision,if plant facilities will remain idle when the decision is made to outsource a part,then the opportunity cost of the plant facilities is zero.Assume there are no alternative uses of the plant facilities available.

Yellow Corporation has a joint process that produces three products: P,G and A.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $25,000.The production level for each product is 10,000 units.Other data follows: Product G ________.

The term opportunity cost applies to a resource that a company ________.

Variable expenses are divided into avoidable and unavoidable costs.

What would be a consideration in a make-or-buy decision?

Qualitative factors do not affect a make-or-buy decision.

Inventory turnover is the number of times the average inventory is sold per year.

LL Company produces and sells a product that has variable costs of $9 per unit and fixed costs of $200,000 per year.If production decreases from 50,000 to 40,000 units,the cost per unit will ________.