Exam 17: Activity Resource Usage Model and Tactical Decision Making

Meco 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. Meco 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 Meco accepts the order. - Assuming Meco 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

Which of the following items would be classified as flexible resources?

Miller Company produces speakers for home stereo units.The speakers 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. The speakers are currently unpackaged.Packaging them individually would increase costs by $1.20 per unit.However, the units could then be sold for $33.00.All other information remains the same as the original data. -What is the effect on profits if Miller Company packages the speakers?

Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: The company has the capacity to produce 90,000 units.The product regularly sells for $120. -A wholesaler has offered to pay $110 a unit for 7,500 units. If the special order is accepted, the effect on operating income would be a

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?

The following information pertains to the Ewing Company's three products: -Assume that the selling price of product F is increased to $8.25 with a reduction in monthly sales to 400 units.Monthly profits will

Figure 17-1 The following information pertains to the EWIN Company's three products: Refer to Figure 17-1.When EWIN converted over to ABC it discovered the following: -The operating income for EWIN would be

Which of the following is NOT a step in the tactical decision-making process?

Which item is NOT an example of a sunk cost?

Information about three joint products follows: The cost of the joint process is $140,000. - Assuming all of the sell now or process further decisions were correctly made, what will be the firm's income?

The following information pertains to Ewing Company's three products: - Assume that product F is discontinued and the space used to produce product F is rented for $600 per month.Monthly profits will

Mickey Company manufactures three joint products: X, Y, and Z.The cost of the joint process is $30,000.Information about the three products follows: Required:

Manning Company uses a joint process to produce products W, X, Y, and Z.Each product may be sold at its split-off point or processed further.Additional processing costs of specific products are entirely variable.Joint processing costs for a single batch of joint products are $120,000.Other relevant data are as follows: -Processing Y further will cause profits to

Barron Company's 2011 income statement is as follows: In an attempt to improve the company's profit performance, management is considering a number of alternative actions. Required: Determine the effect of each of the following on monthly profit.Each situation is to be evaluated independently of all the others.

An important qualitative factor to consider regarding a special order is the

The following information relates to a product produced by Creamer 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

Miller Company produces speakers for home stereo units.The speakers 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. - A San Diego wholesaler has proposed to place a special one-time order of 10,000 units at a reduced price of $24 per unit.The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of $3,000.All other information remains the same as the original data.What is the effect on profits if the special order is accepted?

Figure 17-2 Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: The company has the capacity to produce 90,000 units.The product regularly sells for $120. - Refer to Figure 17-2.If a wholesaler offered to buy 4,500 units for $100 each, the effect of the special order on income would be a

Relevant costs are

Boone 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?