Exam 8: Tactical Decision-Making and Relevant Costing

AlphaBrona Industries manufactures 50,000 components per year.The manufacturing cost of the components was determined as follows: An outside supplier has offered to sell the component for $10.Fixed costs will remain the same if the component is purchased from an outside supplier. What is the effect on income if AlphaBrona Industries purchases the component from the outside supplier?

ColorPro uses part 87A in the production of color printers.Unit manufacturing costs for part 87A are: ColorPro uses 100,000 units of 87A per year.Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12.Fixed overhead is unavoidable. - Which of the following is a qualitative factor that might affect ColorPro's decision?

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 K-3 should be produced?

The difference between the summed costs of two alternatives in a decision is known as the __________________.

Flexible resources may have unused capacity.

Bellair Company produces a product that has manufacturing cost of $30 per unit.Bellair's policy is to charge a price equal to cost plus 30%.The 30% is pure profit to Bellair.

Information about three joint products follows: The cost of the joint process is $140,000.Which of the joint products should be processed further?

Which of the following costs is not relevant to a decision to sell a product at split-off or process the product further and then sell the product?

Connolly Company produces two types of lamps, classic and fancy, with unit contribution margins of $13 and $21, respectively.Each lamp must spend time on a special machine.The firm owns four machines that together provide 18,000 hours of machine time per year.The classic lamp requires 0.20 hours of machine time, the fancy lamp requires 0.50 hours of machine time. ? - What is the contribution margin per hour of machine time for a fancy lamp?

Colortrigon Company makes a variety of paper products.One product is 30 lb copier paper, packaged 3,000 sheets to a box.One box normally sells for $20.A large bank offered to purchase 6,000 boxes at $15 per box.Costs per box are as follows: No variable marketing costs would be incurred on the order.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable. Should Colotrigon accept the order?

Manganese Company makes frames.A customer wants to place a special order for 750 frames in green with the company logo painted on the frame, to be priced at $60 each.Normally, Manganese would charge $100 per frame for this type of order.Manganese figures that wood and glass will cost $20 per frame, variable overhead (machining, electricity) is $5 per frame, direct labor is $10 per frame, and one setup will be required at $1,500 per setup.The set-up charge costs are 100% labor.Currently, the workers needed to set up for and make the frames are working at Manganese.Their wages will be paid whether or not the special order is accepted.Manganese's policy is to avoid layoffs to the extent possible. If Manganese accepts the special order, by how much will operating income increase or decrease?

Information about three joint products follows: The cost of the joint process is $60,000.Which of the joint products should be sold at split-off?

Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process.The joint costs amount to $200,000. If Product B2 is processed further, profits will

If a future cost is the same for more than one alternative, and it has no effect on the decision is known as a(n) _____________ cost.

The profit contribution each segment makes toward covering a company's common fixed costs is called ______________.

Rhine Company sets price equal to cost plus 40%.Recently, Rhine charged a customer a price of $280 for an item.What was the cost of the item to Rhine?

_______________________ focus on whether a product should be processed beyond the split-off point.

Matching ​ Match each statement with the correct item below. -​Make-or-buy decisions

Matching ​ Match each statement with the correct item below. -​Sell-or-process-further decision

Fuller Company makes frames.A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each.Normally, Fuller would charge $90 per frame for this type of order.Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup.The set-up charge costs are 100% labor.Currently, the workers needed to set up for and make the frames are working at Fuller.Their wages will be paid whether or not the special order is accepted.Fuller's policy is to avoid layoffs to the extent possible. - Which of the following is irrelevant to the special order decision?