Exam 8: Using Accounting Information to Make Managerial Decisions

When an outsourcing decision refers to the components of a manufactured product,it is more commonly called an insource or outsource decision.

Moving a company's business processes to a foreign country is referred to as

Harmony Forge manufactures saddles for show horses.The company has received a special order for 290 saddles for an international competition.Each of these saddles would include the specialized logo of the competition.Last year Harmony produced 710 saddles,and the company has the capacity to produce 1,000 saddles per year.Harmony's saddles normally sell for $650 each,but the special offer is for $179,800 $620 per saddle.The controller has provided information to management that estimates the variable cost per saddle is $435; fixed manufacturing overhead is $60/saddle.Of the fixed costs assigned to this special order,$15,950 is for the specialized logos,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?

Outsourcing is a relatively new approach to doing business.

Which of the following is $\textbf{ not }$ a long-term tactical benefit of outsourcing a company's operations?

ABC Company produces three products,Standard,Deluxe and Superior,with the following characteristics: The company has only 1,500 machine hours available each period.If demand exceeds the company's capacity,in what sequence should orders for the three products be filled to maximize the company's total contribution margin?

If a special order is being considered when the product normally sells for $10 and relevant costs are $6 to produce a unit and $2 to sell the unit, which of the following decisions is the most likely to be chosen?

Holt Manufacturing Company produces three products in its Dallas factory.Data relating to the products are given below: A total of 8,200 hours are available in the Dallas facility. a.How many hours will be required to satisfy the demand for all three products? b.How much of each product should be produced to maximize Hold's operating income?

Which of the following is a reason a company would be willing to accept new business at a loss?

In evaluating the relevance of specific information,the decision maker must know

Accepting special orders may produce additional revenues,but may also result in some negative consequences.Discuss the quantitative and qualitative factors that impact the decision to accept a special order.

Logan Corporation is considering a eliminating a department that has incurred losses over the past several years.The department has a contribution margin of $32,000 per year.The fixed costs charged to the department total $37,000.$15,000 of the fixed costs is avoidable.If the department is eliminated,what would be the effect on the corporation's operating income?

Delta Airlines uses Wipro,an Indian company,to handle its customer service calls.This is an example of

Lark Company manufactures dog food for distribution in Washington,Oregon,and California.A dog food distributor from Florida has approached Lark and offered to purchase 240,000 pounds of dog food for $1.40 per pound.Lark can produce 2,000,000 pounds of dog food per year,and its results for last year are as follows: If Lark accepts the offer,it will only be able to sell 1,760,000 pounds of dog food at the regular price due to its capacity constraints.What will Lark's total operating income be next year if it accepts the offer?

Vista Industries manufactures 75,000 digital cameras each year.Vista has been producing the lenses internally.However,late last year the company received an offer to produce the 150,000 lenses the company uses each year for a total contract price of $380,000.When Vista manufactures the lenses internally,direct materials cost $1.05 per lens,direct labor is $.65 per lens,and variable overhead is $.30 per lens.Vista's total overhead is $110,000.If the lens were purchased,$28,000 of fixed overhead could be avoided.What is the total relevant cost to produce the lenses internally?

Range Rider Industries manufactures chairs and tables that are in high demand by local office furniture stores.Following is information for each of these products: Range Rider has 900 machine hours available each month. The demand for chairs is 560 units per month and the demand for tables is 340 units per month. If Range Rider allocates its production capacity between the chairs and tables so that it maximizes the company’s contribution margin, what will the contribution margin be?

Which of the following is $\textbf{ not }$ one of the top ten reasons companies outsource their operations?

When multiple products share a constrained resource,the way to allocate the resource is to compute the

The Robinson-Patman Act of 1936 prohibits companies from engaging in price discrimination - that is,offering the same item to different customers at different prices.

ABC Corporation produces three products,Standard,Deluxe and Superior,with the following characteristics: The company has only 1,800 machine hours available each period.If demand exceeds the company's capacity,in what sequence should orders for the three products be filled to maximize the company's total contribution margin?