Exam 11: Decision Making and Relevant Information

Audio Labs collected the following information on the cost of producing 20,000 speaker units: Cartunes has offered to sell Audio 10,000 speakers for $56.00 each. Should Audio Labs make or buy the parts if the facilities remain idle when speakers are purchased?

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 sets of sentences has two statements which are TRUE?

For one-time-only special orders,variable costs may be relevant but not fixed costs.

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

Ratzlaff Company has a current production level of 20,000 units per month.Unit costs at this level are: Current monthly sales are 18,000 units.Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each.Current sales would NOT be affected by the one-time-only special order,and variable marketing/distribution costs would NOT be incurred on the special order.What is Ratzlaff Company's change in operating profits if the special order is accepted?

Increasing throughput contribution and managing bottlenecks includes all of the following EXCEPT

Which of the following would not be considered in a make or buy decision?

A decision model is a formal method of making a choice that uses only quantitative analyses.

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 a manufacturer chooses to continue purchasing direct materials from a supplier because of the on-going relationship that has developed over the years,the decision is based on qualitative factors.

Answer the following question(s)using the information below. Braun's Brakes manufactures three different product lines,Model X,Model Y,and Model Z.Considerable market demand exists for all models.The following per unit data apply: -If capacity is constrained then which model is the most profitable to produce?

Producing more non-bottleneck output increases throughput contribution.

A computer system installed last year is an example of a(n)

Snapper Tool Company has a production capacity of 3,000 units per month,but current production is only 2,500 units.Total manufacturing costs are $60 per unit and marketing costs are $16 per unit.Doug Levy offers to purchase 500 units at $76 each for the next five months.Should Snapper accept the one-time-only special order if only absorption-costing data are available?

Lovejoy's Cake Shop makes three types of cakes: White,Chocolate,and Swirl on one assembly line that has a limit of 400 labour-hours per week.Lovejoy can sell all the cakes it can make under current operating capacity.Manufacturing information per cake for each product is as follows: Required: Determine the total weekly contribution margin when all labour-hours are allotted to the product with the highest: a.Unit selling price. b.Unit contribution margin. c.Contribution per labour-hour.

Hackerott Camera is considering eliminating Model AE1 from its camera line because of losses over the past quarter.The past three months of information for model AE1 is summarized below: Support costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE1 that has no resale value. Should Hackerott Camera eliminate Model AE1 from its product line? Why or why not?

Jansen Industries is considering replacing a machine that is presently used in its production process.The following information is available: Which of the information provided in the table is irrelevant to the replacement decision?

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?

When making decisions,it is best to use

Answer the following question(s)using the information below. Jim's 5-year-old Geo Prizm requires repairs estimated at $3,000 to make it road worthy again.His friend,Julie,suggested that he should buy a 5-year-old used Honda Civic instead for $3,000 cash.Julie estimated the following costs for the two cars: -The cost NOT relevant for this decision is the