Exam 23: Short-Run Decision Analysis

Products Square,Rect,Tri,and Quatro have contribution margins of $5,$8,$6,and $4,respectively,and require 3.5,2.5,2,and 3 machine hours per unit,respectively.Assuming that all units produced could be sold and that total machine hours per month are limited,on which product should the company concentrate its efforts?

Special order decisions are about whether to accept or reject special orders at prices below the normal market prices.

The costs incurred beyond the split-off point are

Are joint costs relevant to a sell-or-process-further decision? Explain why or why not.

What are the two steps in the analysis of a sales mix decision?

Relative to making a segment profitability (keep-or-drop)decision,explain which costs are avoidable costs and which costs are unavoidable.

Segment profitability analysis includes the preparation of a segmented income statement.

In the analysis of segment profitability,which of the following financial statements is prepared?

Avoidable costs are important for

Selecting the best course of action for a short-run problem or need falls under which stage of the management process?

Managers should use both financial and nonfinancial quantitative and qualitative information as inputs in the decision-making process.

Identifying all reasonable courses of action that can solve a problem or meet a need falls under which stage of the management process?

The point at which products are separated in a joint production process is the

The Dropinsky Company's management wants to determine if Segment B should be eliminated.The following data are available (in thousands). a.Assuming all direct fixed costs of Segment B are avoidable,what would be the change in operating income if Segment B were eliminated? b.Assuming one-half of the direct fixed costs of Segment B are avoidable,what would be the change in operating income if Segment B were eliminated?

What qualitative factors should managers consider before making a special order decision?

Sunk costs are irrelevant for decision making.

What two criteria must be met for information to be considered relevant to decision making?

Keller Company is evaluating its two divisions,North Division and South Division.Data for the North Division include sales of $250,000,variable costs of $125,000,and fixed costs of $200,000,50 percent of which are traceable to the division.Data for the South Division include sales of $300,000,variable costs of $175,000,and fixed costs of $225,000,60 percent of which are traceable to the division. -Common fixed costs for the company are

Conducting post completion audits to determine if desired short-run outcomes were achieved falls under which stage of the management process?

If the incremental costs for a special order of 4,000 units are $6,600 and the company would like to earn a minimum of $1.10 profit per unit,the minimum bid price would be