Exam 8: Using Accounting Information to Make Managerial Decisions

The option of accepting a special order should always be chosen if the price exceeds the relevant costs to produce and deliver the order to the customer.

In a decision to add or eliminate a product or service,which of the following is an avoidable cost?

Brandy Company is deciding whether or not to discontinue one of its divisions.The division's contribution margin is $27,000 per year.The fixed costs charged to the division total $32,000,but $15,000 would be eliminated if the division is discontinued.If the division is eliminated,the overall operating income would

Which of the following laws prohibits companies from engaging in price discrimination?

Offshoring means moving a company's business processes to a foreign country.

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

In an environment where the there is a constrained resource,the resource should be allocated first to the product with the highest contribution margin.

Elton's Electronics is a wholesale distributer for TVs and other electronics and appliances.The selling price of TV Model 83G7 is $799.The following standard cost data per Model 83G7 includes $300 direct material,$30 direct labor and $200 manufacturing overhead 75% variable,25% fixed.Elton has received a special order for 200 Model 83G7s at a price of $450 each.The only additional cost of accepting the special order is a sales commission of $9 per

The first step in making any decision is to consider all available alternatives.

London, Inc. uses 2,000 units of Part 8G3 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $15 per part. If London chooses to purchase the part from the outside supplier, one half of it’s the fixed manufacturing overhead will be eliminated. London’s standard unit cost of producing the part is listed below. Required Ignoring qualitative factors, should London continue to make the parts internally or purchase them from the outside supplier? Why?

Ron Jensen,the controller of Inca Industries,has prepared an analysis to help management determine whether one of Inca's departments should be eliminated.The department's contribution margin is $44,000.The fixed expenses charged to the department total $75,000.Of the fixed expenses,Jensen estimates that $36,000 of those expenses would be eliminated if the department were discontinued.Based on Jensen's analysis,if the department is eliminated,Inca's overall operating income would

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?

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?

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

When an outsourcing decision refers to the components of a manufacturing product,it is commonly called

Which of the following is not a qualitative issue that must be considered before reaching a decision to outsource?

Which of the following is not a qualitative issue in a special order pricing decision?

A type of analysis that helps decision makers understand the impact of their choices is referred to as incremental analysis.

The Theory of Constraints was developed to maximize the performance of a value chain.According to the theory,five steps are required to maximize and improve the performance of a value chain. Required: a.List the five steps. b.Define the two terms bottleneck process and throughput contribution.Indicate how these terms are related to the theory of constraints. Unit 8-4,

The formula for computing the contribution per constrained resource is