Exam 11: Decision Making and Relevant Information

When replacing an old machine with a new machine, the purchase price of the old machine is a relevant cost.

Which of the following is not one of the steps involved in linear programming?

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?

Past costs that are unavoidable and unchangeable are known as

Companies periodically confront decisions about discontinuing or adding branches or business segments. In order to determine the best course of action, a ________ should be performed in order to make the optimal decision.

Precision Sewing Company incorporates the services of Rosie's Sewing. Precision purchases pre-cut dresses from Rosie's. This is primarily known as

Each item included in the relevant-cost analysis should differ according to the alternative being considered and be an expected future revenue or cost.

Econ Services has requested your services in determining the book values of the following assets, respectively. General repairs and maintenance for the automobile amounted to $4,000. Machinery maintenance included $2,000 for general upkeep. What are the book values for Auto and Machinery, respectively?

Expected value may be defined as

Car Parts Company manufactures a part for use in its production of automobiles. The costs per unit when 10,000 items are produced are: Auto Company has offered to sell to Car Parts Company 10,000 units of the part for $60. The plant facilities could be used to manufacture another part at a savings of $90,000 if Car Parts accepts the offer. In addition, $10 per unit of fixed manufacturing overhead on the original part would be eliminated. Required: a. What is the relevant per unit cost for the original part? b. Which alternative is best for Car Parts Company? By how much?

Koch Brothers purchased a new production machine for $200,000. It is capable of producing 400,000 units over its useful life, thus the manufacturer's salesperson claimed the unit cost would only be $0.50. Koch's own engineers recommended that the company acquire a machine that would have a unit cost of production of no more than $0.48 (with a $0.03 variance). A competitor of the vendor, who also was trying to sell Koch some equipment, claimed that the $0.50 is understated by $0.04 per unit. The total anticipated demand over the asset's useful life is 300,000 units. Relevant information includes

Computer Products produces two keyboards, Regular and Special. Regular keyboards have a unit contribution margin of $128, and Special keyboards have a unit contribution margin of $720. The demand for Regulars exceeds Computer Products' production capacity, which is limited by available machine-hours and direct manufacturing labour hours. The maximum demand for Special keyboards is 80 per month. Management desires a product mix that will maximize the contribution toward fixed costs and profits. Direct manufacturing labour is limited to 1,600 hours a month and machine hours are limited to 1,200 a month. The Regular keyboards require 20 hours of labour and 8 machine hours. Special keyboards require 34 labour hours and 20 machine hours. Select the appropriate linear programming objective and constraint functions designed to maximize Computer Products total contribution margin. Let R represent Regular keyboards and S represent Special keyboards.

First Image has a plant capacity of 80,000 units per month. Unit costs at capacity are: Current monthly sales are 78,000 units at $12.60 each. Computer Output Management has contacted First Image about purchasing 2,000 units at $12.00 each. Current sales would not be affected by the special order. What is First Image's change in profits if the order is accepted?

Employee morale at Bedland Inc. is very high. This type of information is known as

Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for $1,250 each. Southwestern's plant can manufacture the motors for the following costs per unit: If Southwestern buys the motors from Jinx, 30% of the fixed manufacturing overhead applied will be avoided. Required: a. Should the company make or buy the motors? b. What additional factors should Southwestern consider in deciding whether or not to make or buy the motors?

If Harry Inc. doesn't use one of its limited resources in the best possible way, the lost contribution to income could be called

The feedback obtained in the decision process cannot affect

Anticipated future costs that differ with alternative courses of action are known as relevant costs.

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

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