Exam 11: Decision Making and Relevant Information

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. -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.What are the relevant figures above for management in their decision?

The feedback obtained in the decision process cannot affect

When making decisions, it is best to use

Which of the following anticipated future costs always differ among alternative courses of actions?

Sam, a bakery manager, replaced the convection oven just six months ago.Today, Commercial Ovens Manufacturing announced the availability of a new convection oven that cooks more quickly with lower operating expenses.Sam is considering the purchase of this faster, lower-operating cost convection oven to replace the existing one they recently purchased.Selected information about the two ovens is given below: Required: a.What costs are sunk? b.What costs are relevant? c.What are the net cash flows over the next 5 years assuming the bakery purchases the new convection oven? d.What other items should Sam, as manager of the bakery, consider when making this decision?

Answer the following question(s)using the information below.Mable's Engine Company manufactures part Z92 used in several of its engine models.Monthly production costs for 1,000 units are as follows: Mable's Engine Company has the option of purchasing the part from an outside supplier at $61 per unit.It is estimated that all of the fixed overhead costs assigned to Z92 will remain if the company purchases Z92 from the outside supplier. -The maximum price that Mables's Engine Company should be willing to pay the outside supplier is

A company has two manufacturing facilities: one in Alberta that produces a bulk chemical that it sells to many different retailers, and one facility in Ontario that is dedicated to producing a specialty chemical for one client only.The annual profit from the single client is $150,000; and, the profit from the other facility's sales is $1,500,000, after allocating combined fixed costs based on units produced.Another company has offered to lease the Ontario facilities for $250,000.Which of the following is TRUE?

Electrical Engineering Equipment Ltd.purchased a machine for $100,000; current accumulated amortization totals $40,000.Management is contemplating the purchase of a new machine for $120,000.Current disposal of the old machine would cost $65,000.What is the correct category for each item?

Answer the following question(s)using the information below.John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again.His wife, Sherry, suggested that he should buy a 5-year-old used Jeep Grand Cherokee instead for $6,000 cash.Sherry estimated the following costs for the two cars: -What should John do? What are his savings in the first year?

The management accountant for the Chocolate S'more 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.Required: 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?

Throughput contribution is equal to revenues minus direct material and direct labour costs.

Silver Lake Cabinets is approached by Ms.Jenny Zhang, 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: Silver Lake Cabinets has excess capacity.Ms.Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.Required: a.For Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order? b.Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order? c.How would the analysis differ if there was limited capacity?

The financial measures used to evaluate a manager's performance should be consistent with the decision model.

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: -For Welch Manufacturing, what is the minimum acceptable price of this special order?

Which of the following factors would be considered irrelevant when evaluating equipment replacement decisions?

Answer the following question(s)using the information below.Quick Shop Printing has two workstations, cutting and pasting.The cutting station is limited by the speed of operating the cutting machine.Pasting is limited by the speed of the workers.Pasting normally waits on work from cutting.Each department works an eight-hour day.If cutting begins work two hours earlier than pasting each day, the two departments generally finish their work at about the same time.Not only does this eliminate the bottleneck, but it increases finished units produced each day by 80 units.All units produced can be sold.The cost of operating the cutting department two more hours each day is $800.The contribution margin of the finished products is $3 each.Inventory carrying costs are $0.20 per unit per day. -Which of the following statements is TRUE?

The gain or loss on the disposal of a machine is a relevant factor when considering replacing the machine if tax is a consideration.

Answer the following question(s)using the information below.Speedy Dress Manufacturing has two workstations, cutting and finishing.The cutting station is limited by the speed of operating the cutting machine.Finishing is limited by the speed of the workers.Finishing normally waits for work from cutting.Each department works an eight-hour day.If cutting begins work two hours earlier than finishing each day, the two departments generally finish their work at about the same time.Not only does this eliminate the bottleneck, but also it increases finished units produced each day by 160 units.All units produced can be sold even though the change increases inventory stock by 20% from 400 units.The cost of operating the cutting department two more hours each day is $1,600.The contribution margin of the finished products is $6 each.Inventory carrying costs are $0.40 per unit per day. -What is the total production per day if the change is made?

If the $17,000 spent to purchase inventory could be invested and earn interest of $1,000, then the opportunity cost of holding inventory is $17,000.

Answer the following question(s)using the information below.Mable's Engine Company manufactures part Z92 used in several of its engine models.Monthly production costs for 1,000 units are as follows: Mable's Engine Company has the option of purchasing the part from an outside supplier at $61 per unit.It is estimated that all of the fixed overhead costs assigned to Z92 will remain if the company purchases Z92 from the outside supplier. -If Mables's Engine Company purchases 1,000 Z92 parts from the outside supplier per month, then its monthly operating income will