Exam 11: Decision Making and Relevant Information

A company is considering adding a fourth product to use available capacity.A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders.

Direct materials are $600,direct labor is $150,variable overhead costs are $450,and fixed overhead costs are $300.The cost of one unit is ________.

Answer the following questions using the information below: Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials \ 46,000 Direct labor 11,500 Variable overhead costs 34,500 Fixed overhead costs 23,000 Total costs \ 115,000 It is estimated that 8% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent's Engine Company has the option of purchasing the part from an outside supplier at $97.75 per unit. -The maximum price that Genent's Engine Company should be willing to pay the outside supplier is ________.

Lander Metals Inc.manufactures automobile spare parts for car manufacturers.Management is attempting to search for ways to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange the production floor next year.Using the information below regarding current operations and the new proposal,which of the following decisions should management accept? Current Proposed Required machine operators 16 12 Materials-handling workers 3.00 3.00 Employee average pay \ 15 per hour \ 18 per hour Hours Worked per employee 3,400 3,150

When deciding to accept a one-time-only special order from a wholesaler,management should ________.

What are opportunity costs? Explain why opportunity costs are not recorded in financial accounting systems.

What is the change in operating profits if the one-time-only special order for 1,000 units is accepted for $540 a unit by Coroid?

Kirkland Company manufactures a part for use in its production of hats.When 10,000 items are produced,the costs per unit are: Direct materials \ 0.60 Direct manufacturing labor 3.00 Variable manufacturing overhead 1.20 Fixed manufacturing overhead Total \6 .40 Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit.The plant facilities could be used to manufacture another item at a savings of $9,000 if Kirkland accepts the offer.In addition,$1.00 per unit of fixed manufacturing overhead on the original item would be eliminated. Required: a.What is the relevant per unit cost for the original part? b.Which alternative is best for Kirkland Company? By how much?

The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit.In 2014,Supplier ABC has offered to supply Part A for $18 per unit.For the make-or-buy decision ________.

Feedback from previous decisions uses historical information and,therefore,is irrelevant for making future predictions.

Which of the following costs always differ among future alternatives?

Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

Qualitative factors are important in the decision-making process even though they cannot be measured numerically.

A sunk cost is a relevant cost in a decision making.

Roberto owns a small body shop.His major costs include labor,parts,and rent.In the decision-making process,these costs are considered to be ________.

For decision making,a listing of the relevant costs ________.

Which of the following costs is NOT considered to calculate the minimum acceptable price of a one-time-only special order?

If a company has excess capacity,the most it would pay for buying a product that it currently makes would be the ________.

Sunk costs ________.