Exam 11: Decision Making and Relevant Information

Genent's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging.An outside supplier has offered to supply all of the needed decorative jars.For this make-or-buy decision,a cost analysis revealed the following avoidable unit costs for the decorative jars: The maximum price that Genent's Preserves should be willing to pay for the decorative jars is ________.

When using the five-step decision process,which one of the following steps should be done first?

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 6,500 per week. What is the contribution margin per machine-hour for a medium appliance?

A decision model involves a(n)________.

Springer Products 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 there is excess capacity,which model is the most profitable to produce?

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.

In a decision as to whether or not to drop a product,fixed costs that have been allocated to that product are generally not relevant unless there is a savings of fixed costs as a result of dropping the product.

________ is relevant in a decision to replace equipment.

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

Giant Company has three products,A,B,and C.The following information is available: Giant Company is thinking of dropping Product C because it is reporting a loss.Assuming Giant drops Product C and does NOT replace it,operating income will ________.

Management is considering two alternatives.Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000.Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen.There are also other qualitative factors that management must consider before making a final choice.Which of the following statements is correct about relevant costs and relevant revenues.

The rent paid for an already existing facility is an example of a sunk cost.

Which of the following is true of relevant information?

Place the following steps from the five-step decision process in order:

Depreciation allocated to a product line is a relevant cost when deciding to discontinue that product.

Variable cost per unit is the best product cost to use for one-time-only special order decisions.

Unit cost data can most mislead decisions by ________.

Excellent Manufacturers Inc.has a current production level of 20,000 units per month.Unit costs at this level are: Current monthly sales are 18,000 units.Jax Company has contacted Excellent about purchasing 1,550 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?

Sunk costs ________.

In a make-or-buy decision,which of the following would not be relevant?