Exam 17: Activity Resource Usage Model and Tactical Decision Making

Noreaster Company produces a product that has a regular selling price of $360 per unit. At a typical monthly production volume of 2,000 units, the product's average unit cost of goods sold amounts to $270. Included in this average is $120,000 of fixed manufacturing costs. All selling and administrative costs are fixed and amount to $30,000 per month. Noreaster Company has just received a special order for 1,000 units at $240 per unit. The buyer will pay transportation, and the regular selling price will not be affected if Noreaster accepts the order. Assuming Noreaster Company is operating at capacity and accepting the order would require an offsetting reduction in regular sales, the effect on profits of accepting the order would be a

Albatross Products had the following unit costs: A one-time customer has offered to buy 2,000 units at a special price of $48 per unit. Because of capacity constraints, 1,000 units will need to be produced during overtime. Overtime premium is $8 per unit. How much additional profit (loss) will be generated by accepting the special order?

The steps in the tactical decision making process are: What is the proper sequence of steps?

A doctor choosing between buying laboratory tests externally or performing the tests in house is an example of a __________ decision. or

Zildjian Corporation manufactures a single product with the following unit costs for 1,250 units: Recently, a company approached Zildjian Corporation about buying 100 units for $5,100 each. Currently, the models are sold to dealers for $7,900. Zildjian 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?

One of Maersk cargo ships hit an iceberg and sank. In deciding whether or not to salvage the ship, its book value is a(n)

Yankton Industries manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: If the component is not produced by Yankton, inspection of products and provision of power costs will only be 10 percent of the production costs; moving materials costs and setting up equipment costs will only be 50 percent of the production costs; and supervision costs will amount to only 40 percent of the production amount. An outside supplier has offered to sell the component for $23.50. What is the effect on income if Yankton Industries purchases the component from the outside supplier?

Which of the following items would be classified as committed resources (short-term)?

Yankton Industries manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: An outside supplier has offered to sell the component for $23.50. What is the effect on income if Yankton Industries purchases the component from the outside supplier?

Information about three joint products follows: The cost of the joint process is $140,000. If the firm is currently processing all three products beyond split-off, the firm's income would be

Choosing to make or buy may reduce the cost of producing the main product and increase the quality.

Upfront resource spending

Which of the following costs is NOT relevant to a make-or-buy decision?

Cellestial 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

Yosemite Company produces Blu-Ray Players for home stereo units. The Blu-Ray Players 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. An Atlanta wholesaler has proposed to place a special one-time order for 7,000 units at a special price of $25.20 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of $6,000. In addition, assume that overtime production is not possible and that all other information remains the same as the original data. What is the effect on profits if the special order is accepted?

The following information relates to a product produced by Malkovich Company: Fixed selling costs are $500,000 per year, and variable selling costs are $12 per unit sold. Although production capacity is 600,000 units per year, the company expects to produce only 400,000 units next year. The product normally sells for $120 each. A customer has offered to buy 60,000 units for $90 each. The incremental cost per unit associated with the special order is

Which of the following costs is NOT relevant for special decisions?

The first of the six steps of the tactical decision model is to recognize and define the problem.

Sunk costs are

For flexible resources, which of the following statements is true?