Exam 11: Decision Making and Relevant Information

Answer the following question(s)using the information below.Grant's Kitchens is approached by Ms.Tammy Wang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers.The following per unit data apply for sales to regular customers: Grant's Kitchens has excess capacity.Ms.Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit. -For Grant's Kitchens, what is the minimum acceptable price of this one-time-only special order?

If management takes a multiple-year view in the decision model and judges success according to the current year's results, a problem will occur in the

The theory of constraints describes methods of reducing bottlenecks by identifying and reducing fixed costs previously viewed as variable.

Under what conditions might a manufacturing firm sell a product for less than its long-term price? Why?

Answer the following question(s)using the information below.Braun's Brakes manufactures three different product lines, Model X, Model Y, and Model Z.Considerable market demand exists for all models.The following per unit data apply: -If capacity is constrained by machine hours then which model(s)is the most profitable to produce?

A customer can be considered to be a cost object, in the decision to add or drop a particular customer.

Ignoring tax consequences, how should the gain or loss on disposal of an old machine be treated in an equipment replacement decision?

The only cost of poor quality at a nonbottleneck operation is the cost of the materials wasted.

Which of the following costs are never relevant in the decision-making process?

The management accountant for the Awesome Candy Company has prepared the following income statement for the most current year: * The company pays for the entire space and allocates based on sq.metres used.a.Do you recommend discontinuing the Other Candy product line? Why or why not? b.If the Chocolate product line had been discontinued, corporate profits for the current year would have decreased by what amount?

Answer the following question(s)using the information below.Specialty Wheels Ltd.manufactures three different product lines, Model X, Model Y, and Model Z.Considerable market demand exists for all models.The following per unit data apply: -The greatest possible contribution margin per unit of the constraining factor will ensure which of the following?

Answer the following question(s)using the information below.Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Welch Manufacturing has excess capacity.The following per unit data apply for sales to regular customers: -What is the contribution margin per unit?

Answer the following question(s)using the information below.Central Medical Supply Inc., a manufacturer of medical testing equipment, has $240,000 worth of an obsolete line of testing equipment.The obsolete equipment can be adapted to fit another line of testing equipment at a cost of $64,000; the market value would then be $136,000.However, Tripac offered to purchase the obsolete equipment as is for $88,000. -The opportunity cost of holding significant inventory includes

Answer the following question(s)using the information below.Konrade's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1,000 units are as follows: It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier.Konrade's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. -If Konrade's Engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly operating income will

Quiett Truck manufactures part WB23 used in several of its truck models.10,000 units are produced each year with production costs as follows: Quiett Truck has the option of purchasing part WB23 from an outside supplier at $11.20 per unit.If WB23 is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.Required: a.Describe avoidable costs.What amount of the WB23 production costs is avoidable? b.Should Quiett Truck outsource WB23? Why or why not? c.What qualitative factors should Quiett Truck consider before outsourcing any of the parts it currently manufactures?

When considering the theory of constraints, operating costs refer to all costs involved in the manufacturing process.

If a manufacturer chooses to continue purchasing direct materials from a supplier because of the on-going relationship that has developed over the years, the decision is based on qualitative factors.

Answer the following question(s)using the information below.Specialty Wheels Ltd.manufactures three different product lines, Model X, Model Y, and Model Z.Considerable market demand exists for all models.The following per unit data apply: -If there is excess capacity then which model is the most profitable to produce?

Book value of equipment is irrelevant in equipment-replacement decisions.

When opportunity costs exist, they are always relevant.