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

The future costs that differ across alternatives are called

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

Information about three joint products follows: The cost of the joint process is $140,000. Which of the joint products should be processed further?

Foreign trade zones are set up by the U.S. government to facilitate warehousing and/or manufacturing for companies.

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

The cost of acquiring activity capacity is(are)

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

Wallyworld 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. If a wholesaler offered to buy 4,500 units for $100 each, the effect of the special order on income would be a

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

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

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. If the firm produces the special order, the effect on income would be a

The use of relevant cost data to identify the alternative that provides the greatest benefit to the organization describes

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?

If there is excess capacity, the minimum acceptable price for a special order must cover

Tactical decision making relies

Tactical cost analysis uses cost data to identify the choice that will bring the organization the most benefit.

Hobart Company produces speakers for home stereo units. The speakers are sold to retail music stores for $30. Manufacturing and other costs are as follows: The variable distribution costs are for transportation to the retail music stores. The current production and sales Volume is 20,000 per year. Capacity is 25,000 units per year. A Memphis manufacturing firm has offered a one-year contract to supply speaker parts at a cost of $17.00 per unit. If Hobart Company accepts the offer, it will be able to rent unused space to an outside firm for $18,000 per year. All other information remains the same as the original data. What is the effect on profits if Hobart Company buys from the Memphis firm?

Tactical decision making includes decisions to make or buy a component.

The last of the six steps of the tactical decision model is to choose the quickest way to solve the problem.