Exam 17: Activity Resource Usage Model and Tactical Decision Making

Menagerie Products had the following unit costs: A one-time customer has offered to buy 900 units at a special price of $47 per unit. Assuming that sufficient Unused production capacity exists to produce the order and no regular customers will be affected by the order, how much additional profit (loss) will be generated from the special order?

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

A purchasing agent has two potential firms from which to buy materials for production. If both firms charge the same price, the material cost is a(n)

In order for costs or benefits to be relevant, what must be true?

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)

Describe the steps in the decision-making process. What is the role of qualitative factors in tactical decision- making?

Maldovar Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achieving the expected results. The following information is available: Expected maintenance costs of new machine $12,000 per year Purchas price of existing machine $150,000 Expected cost savings of new machine $20,000 per year Expected maintenance costs of existing machine $8,000 per year Resale value of existing machine $35,000 Which of these items is IRRELEVANT?

A sunk cost is irrelevant because it has no influence over future decisions, so it is depreciated.

The U.S. government has set up foreign trade zones (FTZ) that

Which of the following is NOT a way that companies might reduce tariffs?

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?

If a firm is at full capacity, the minimum special order price must cover

Cellestial Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to $200,000. If Processed Further If Product B2 is processed further, profits will

The following three situations are given for Gioulis Architects: I. Gioulis Architects employs 10 architects who can supply a capacity of 18,000 billable hours per year. The costs related to these 10 architects amounts to $900,000 or $50 per hour. Last year, the firm billed 17,800 hours. Next year, the firm estimates billing hours to take a slight downturn to 17,000 hours. However, Gioulis plans to retain all 10 architects. II. Gioulis Architects also employs surveyors on a contract basis. Last year, Gioulis contracted with 8 surveyors to provide surveys for existing projects. Due to the expected downturn for next year, Gioulis will only contract services of 7 surveyors as needed. III. Gioulis currently leases space in a building at the cost of $36,000 per year. They are outgrowing their space and contemplating a decision to design and build their own building at a cost of $250,000. The new building would have space for at least 18 architects. Identify which resource category relates to each situation under the activity resource usage model and explain your choice.

Modesto Company produces CD Players for home stereo units. The CD 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. 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?

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. What is the profit earned by Zildjian Corporation on the original 1,250 units?

The cost of acquiring activity capacity is called spending.

A decision to make a component internally versus purchasing from a supplier is a

In a keep-or-drop decision, the income or loss determines whether a segment is kept or dropped.

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