Exam 17: Activity Resource Usage Model and Tactical Decision Making

Boniatillo Corporation, which produces one product, had the following income statement for a recent month: Boniatillo Corporation Income Statement For the Month of March 2016 There were no beginning or ending inventories of work-in-process or finished goods. Boniatillo's manufacturing costs were as follows: Boniatillo has just received a special order from a firm in China to purchase 900 units at $20 each. The order will not affect the selling price to regular customers. Required: a. Prepare a differential analysis of the relevant costs and revenues associated with the decision to accept or reject the special order, assuming Boniatillo has excess capacity. b. Determine the net advantage or disadvantage (profit increase or decrease) of accepting the order, assuming Boniatillo does not have excess capacity.

Figure 17-2 Wannabee 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. 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

Upfront resource spending

Composite Company uses 5,000 units of part AA1 each year. The cost of manufacturing one unit of part AA1 at this volume is as follows: An outside supplier has offered to sell Composite Company unlimited quantities of part AA1 at a unit cost of $32)00. If Composite Company accepts this offer, it can eliminate 50 percent of the fixed costs assigned to part AA1. Furthermore, the space devoted to the manufacture of part AA1 would be rented to another company for $24,000 per year. If Composite Company accepts the offer of the outside supplier, annual profits will

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 Dallas Churning Company's three products: Assume that product F is discontinued and the space is used to produce E. Product E's production is increased to 2,200 units per month, but E's selling price of all units of E is reduced to $10.20. Monthly profits will

Which item is NOT an example of a sunk cost?

Rosario Manufacturing Company had the following unit costs: Direct materials $24 Direct labor 8 Variable factory overhead 10 Fixed factory overhead (allocated) 18 A one-time customer has offered to buy 2,750 units at a special price of $49 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 by accepting the special order?

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?

Decisions consisting of selecting among alternatives with immediate ends in views are called decisions.

The operations of Smithsonian Corporation are divided into the Manhattan Division and the Bronx Division. Projections for the next year are as follows: Operating income for Smithsonian Corporation as a whole if the Bronx Division were dropped would be

The operations of California Corporation are divided into the Mendocino Division and the Napa Division. Projections for the next year are as follows: Operating income for California Corporation as a whole if the Napa Division were dropped would be

Flexible resources are acquired way ahead of time.

Which of the following statements is TRUE when making a decision between two alternatives?

Gandolph Company manufactures a product with the following costs per unit at the expected production of 30,000 units: The company has the capacity to produce 40,000 units. The product regularly sells for $40. A wholesaler has Offered to pay $32 a unit for 2,000 units. If the firm is at capacity and the special order is accepted, the effect on operating income would be

Future costs that differ across alternatives describe

For flexible resources, if the demand for an activity changes across alternatives, then resource spending will remain the same and costs are relevant.

Mortimer Company manufactures three joint products: X, Y, and Z. The cost of the joint process is $30,000. Information about the three products follows: a. Determine whether each product should be sold at split-off or processed further. Show all supporting calculations in good form. b. Determine the firm's income if the firm processed all three products beyond split-off.

Areas that are physically on U.S. soil but considered to be outside U.S. commerce are called zones.

The choosing among alternatives with an immediate or limited end in view consists of: