Exam 8: Using Accounting Information to Make Managerial Decisions

Brandon,Inc.is a consulting firm headquartered in Dallas.Trish Hardin,CEO of the company plans to attend a professional conference in Atlanta where she intends to network in the pursuit of business.She enjoys shopping and dining in Atlanta and is looking forward to the trip.She registered for the conference and made hotel and airfare reservations six weeks ago.Her airline ticket and registration fee are non-refundable,but it is not too late to cancel her hotel room.The day before the conference,a company executive from El Dorado calls and wishes to meet with Trish the next day regarding a consulting project.If Trish chooses to make the trip to El Dorado,she will drive.Both trips will require an overnight stay.Trish does not have a prediction of how much revenue either trip may generate.Costs related to the two trips are as follows: Required: a. Which of the above costs are not relevant? b. Without considering qualitative factors, which alternative will Trish choose? Why? c. What are three factors other than costs that Trish should consider?

In making the decision about whether to accept a special order for pianos,which of the following costs should be considered?

Glade Industries manufactures and bottles energy drinks.Last year the company made and bottled 2,500,000 units. Glade has the capacity to manufacture and bottle 3,000,000 units per year. Glade has received a special offer from a grocery chain for 500,000 bottles with a special label to be sold as the house brand energy drink. Glade’s normal selling price is $.80 per bottle. The special offer is for $360,000 total $.72/bottle. Management estimates that the variable cost per bottle is $.34; fixed manufacturing overhead is $.22/bottle. Of the fixed costs assigned to this special order, $2,500 is for the special labels, the remainder is attributable to costs that will be incurred regardless of whether the special order is produced. What is the operating income generated by the special order?

According to the theory of constraints,which of the following is not a step required to maximize and improve the performance of a value chain?

Which of the following is $\textbf{ not }$ a qualitative issue that must be considered before reaching a decision to outsource?

Because of rising salaries and cost of healthcare and other employee benefits,TJ Manufacturing has decided to outsource one of its non-value added processes.As leader of the team responsible for determining the best process to be outsourced,you must write the memo to the CEO,Jon Duncan,explaining why your team chose to outsource the payroll function.Explain to the CEO the qualitative and quantitative impacts of your team's decision on the business.

Jerry Mounds,controller for Pearl Distributing,has prepared the following financial information for the most recent period showing profitability the of its three departments : The factory rent of $3,200 assigned to Department C is avoidable if the department is eliminated.Depreciation will remain unchanged if a department is dropped.Discontinuing Department C will reduce the utilities by $600. Required: Prepare an analysis showing whether Department C should be eliminated.

Complete the table below by placing an "X" under each heading that classifies the costs as avoidable or unavoidable in a decision to accept a special order.

Which of the following is $\textbf{ not }$ a qualitative issue that must be considered before reaching a decision to outsource?

In deciding whether to eliminate a segment of a business,an important issue is the identification of common costs.ans the following questions relating to common costs. a.What is a common fixed cost? b.Is a common fixed cost considered relevant? c.Give two examples of common fixed costs. d.What happens to common fixed costs if a segment is eliminated?

Paper Moon,a manufacturer of outdoor lighting fixtures is operating at less than full capacity.The plant manager is considering making the mounting brackets now being purchased from a supplier at $8 each.Paper Moon already has the equipment to produce the brackets.The plant manager has analyzed the cost of producing the brackets and determined that each bracket will require $2 of direct material,$1 of direct labor,and $8 of manufacturing overhead.Seventy-five percent of the manufacturing overhead is a fixed cost that would not be affected by the decision to manufacture the brackets.Should Paper Moon continue to purchase the brackets or produce them internally?

List the two criteria information meet to be considered relevant to decision making and explain the difference between sunk cost and opportunity cost and indicate whether they can be considered relevant.

Costs such as rent and the production manager's salary are non-differential,but are relevant.

In response to a growing awareness of various allergies,Barb's Better Breads BBB developed baking mixes which contain a unique blend of gluten-free flours and starches,including almond meal,organic flax seeds and arrowroot.The breads are also baked in a preheated,heavy,lidded pan which creates a better crust and texture in gluten-free breads.BBB has been approached by a large restaurant chain to supply the bread used in restaurants throughout the region.Due to demand,almond meal is often in limited supply.Pertinent information for 3 types of bread follows: Required a.Assuming no raw material constraints and unlimited demand for all 3 types of bread,what type of bread would maximize the company's contribution margin? Why? b.Assume that based on typical customer demand,BBB will sell 12,000 loaves of cinnamon raisin,8,000 loaves of ciabatta,and 10,000 loaves of crusty french.What will the company's contribution margin be? c.BBB's almond meal supplier has announced a shortage of almond meal.As a result,BBB will only be able to purchase 20,000 pounds of almond meal.How many loaves of each type of bread should the company bake? What will the company's contribution margin be?

An auto body shop is trying to decide whether or not to purchase a new piece of diagnostic equipment.Which of the following costs would $\textbf{ not }$ be relevant to the decision?

Which of the following is $\textbf{ not }$ a qualitative issue in a special order pricing decision?

Moving the production of goods from within the organization to a provider outside the organization is referred to as

When choosing between alternatives,the contribution margin of the next-best alternative is called

A dance studio is considering a plan to add ballroom dance to its offerings.Which of the following is a relevant consideration in this decision?

Which of the following is $\textbf{ least }$ likely to be a constrained resource?