Exam 8: Tactical Decision-Making and Relevant Costing

Myosot Company produces two models of a component, Model K-3 and Model P-4.The unit contribution margin for Model K-3 is $12; the unit contribution margin for Model P-4 is $20.Each model must spend time on a special machine.The firm owns two machines that provide 6,000 hours of machine time per year together.Model K-3 requires 24 minutes of machine time; Model P-4 requires 36 minutes of machine time. What is the amount of machine time for model K-3 in terms of percent of a machine hour?

Miller Company produces speakers for home stereo units.The speakers are sold to retail stores for $30.Manufacturing and other costs are as follows: The variable distribution costs are for transportation to the retail stores.The current production and sales volume is 20,000 per year.Capacity is 25,000 units per year. A Tennessee manufacturing firm has offered a one-year contract to supply speakers at a cost of $17.00 per unit.If Miller Company accepts the offer, it will be able to rent unused space to an outside firm for $18,000 per year.All other information remains the same as the original data.What is the effect on profits if Miller Company buys from the Tennessee firm?

Fixed costs are never relevant.

Lavandyr Company has two divisions with the following segment margins for the current year: Northern, $300,000 and Southern, $500,000.Common expenses of the company are $75,000.What is Lavandyr Company's income?

Irisen Company has designed a caller ID machine with a large screen that can be seen easily from across the room.The sales department believes that this product can be sold for $40 each.Irisen requires that all new products yield 10% profit.What is the target cost of the new product?

A decision that focuses on whether a specially priced order should be accepted or rejected is what kind of decision?

All ______________ expenses will vanish if a particular segment is eliminated.

Sabor Inc.is a medical testing laboratory that performs several tests and analyses for hospitals in the area.Four of the tests that they perform require the use of a specialized machine that can supply 14,000 hours per year.Information on the four lab tests follows: -What is the contribution margin per hour of machine time for Test A?

Matching ​ Match each statement with the correct item below. -​Split-off point

Which of the following decisions determines whether a product line or segment should be continued or eliminated?

Raffles Company routinely bids on construction jobs.Raffles first determines the budgeted product cost of the job and then applies a markup of 50%.If a bid of $15,000 is submitted for a new job, which of the following is true?

Matching ​ Match each statement with the correct item below. -​Joint products

Resources that are acquired in advance of usage are flexible resources.

A segment margin is always greater than or equal to zero.

On a segmented income statement, fixed expenses are broken down into _____________ and ______________.

Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit.

In deciding the optimal mix of products that use a constrained resource, it is important to determine the contribution margin per unit of scarce resource.

Which of the following involves choosing between alternatives with an immediate or limited time frame in mind?

Reggie Corporation manufactures a single product with the following unit costs for 1,000 units: Recently, a company approached Reggie Corporation about buying 100 units for $5,100 each.Currently, the models are sold to dealers for $7,800.Reggie Corporation's capacity is sufficient to produce the extra 100 units.No additional selling expenses would be incurred on the special order. How much will income change if the special order is accepted?

Santorino Company produces two models of a component, Model K-3 and Model P-4.The unit contribution margin for Model K-3 is $6; the unit contribution margin for Model P-4 is $14.Each model must spend time on a special machine.The firm owns two machines that together provide 4,000 hours of machine time per year.Model K-3 requires 15 minutes of machine time; Model P-4 requires 30 minutes of machine time. - Now suppose that Santorino Company can sell only 5,500 units of each model.How many units of Model P-4 should be produced?