Exam 11: Decision Making and Relevant Information

Colonial North Manufacturing,Inc.is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

In evaluating different alternatives,it is useful to concentrate on ________.

A.C .Tech Manufacturing Appliances manufactures three sizes of kitchen appliances: small,medium,and large.Product information is provided below. The maximum machine-hours available are 6,200 per week. How many of each product should be produced per month using the short-run profit maximizing strategy?

In linear programming,a constraint is a mathematical inequality or equality that must be satisfied by the variables in a mathematical model.

Rubium Micro Devices currently manufactures a subassembly for its main product.The costs per unit are as follows: Crayola Technologies Inc.has contacted Rubium with an offer to sell 10,000 of the subassemblies for $138.00 each.Rubium will eliminate $89,000 of fixed overhead if it accepts the proposal.What are the relevant costs for Rubium?

When evaluating a make-or-buy decision,which of the following needs to be considered?

Which of the following minimizes the risks of outsourcing?

Which of the following is an appropriate step when identifying relevant costs to make a business Decision?

Past costs themselves are always irrelevant when making decisions.

In a one-time special order situation,if the price offered by the buyer is less than the absorption cost per unit,the special order may still be profitable since absorption costs include allocated fixed manufacturing overhead.

Altec Services Corporation has relevant costs of $46 per unit to manufacture 1,050 units of Part A.A current supplier offers to make Part A for $33 per unit.Alternatively,the company can rent out the capacity for $30,000.If capacity is constrained,the opportunity cost of buying Part A from the supplier is ________.

Loft 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: Loft Lake Cabinets has excess capacity.Ms.Zhang wants the cabinets in cherry rather than oak,so direct material costs will increase by $15 per unit. Required: a.For Loft Lake Cabinets,what is the minimum acceptable price of this one-time-only special order? b.Other than price,what other items should Loft Lake Cabinets consider before accepting this one-time-only special order? c.How would the analysis differ if there was limited capacity?

Opportunity costs is defined as ________.

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

Equal weight must be given to qualitative factors and quantitative nonfinancial factors while making decisions.

For short-run product-mix decisions,managers should focus on minimizing total fixed costs.

One-time-only special orders should only be accepted if ________.

Sunk costs ________.

Under the opportunity cost approach,the cost of each alternative includes the incremental costs and the opportunity cost.

For managers attempting to maximize operating income for a product offering with a great deal of variety,product-mix decisions must usually take into account: