Question 1

The steps in the tactical decision making process are:  What is the proper sequence of steps?

Accepted Answer

A)  I, II, V, III, IV 
B)  II, I, V, III, IV 
C)  V, II, III, I, IV 
D)  V, III, II, IV, I

Question 2

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 product margin for product M using ABC would be

Accepted Answer

A)  $9,000. 
B)  $13,840. 
C)  $19,000. 
D)  $27,000.

Question 3

Rose Manufacturing Company had the following unit costs:  A one-time customer has offered to buy 2,000 units at a special price of $48 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?

Accepted Answer

A)  $12,000 profit 
B)  $96,000 profit 
C)  $84,000 loss 
D)  $24,000 loss

Question 4

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

Accepted Answer

A)  variable costs associated with the special order. 
B)  variable and fixed manufacturing costs associated with the special order. 
C)  variable and incremental fixed costs associated with the special order. 
D)  variable costs and incremental fixed costs associated with the special order plus foregone contribution margin on regular units not produced.

Question 5

The management of James Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier.A $200 cost per component was determined as follows:
  James Industries uses 4,000 components per year.After Light, Inc., submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component.If the component is obtained from Light, Inc., James's unused production facilities could be leased to another company for $50,000 per year.
Required:

Accepted Answer

The answer of The management of James Industries has been...

Question 6

Abbott 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:  Which of these items is IRRELEVANT?

Accepted Answer

A)  Expected maintenance costs of new machine 
B)  Purchase cost of existing machine 
C)  Expected maintenance costs of existing machine 
D)  Expected resale value of existing machine

Question 7

Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process.The joint costs amount to $200,000. 
- Which product(s) should be sold at split-off to maximize profits in the short run?

Accepted Answer

A)  Product A1 
B)  Product D4 
C)  Product B2 
D)  Products A1 and D4

Question 8

Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows:  An outside supplier has offered to sell the component for $12.75.
What is the effect on income if Vest Industries purchases the component from the outside supplier?

Accepted Answer

A)  $270,000 decrease 
B)  $270,000 increase 
C)  $30,000 decrease 
D)  $30,000 increase

Question 9

Reggie Corporation manufactures a single product with the following unit costs for 1,000 units:  Recently, a company approached Reggie Corporation about buying 100 units for $5,100 each.Currently, the models are sold to dealers for $7,800.
Assume there is additional capacity for 60 more units and the firm has to reduce regular customer sales by 40 units in order to contract the special order.There are selling expenses on only the sales to the regular customers.What is the net income if the special order of 100 units is accepted?

Accepted Answer

A)  $831,960 
B)  $876,960 
C)  $1,011,600 
D)  $900,000

Question 10

Junior Company currently buys 30,000 units of a part used to manufacture its product at $40 per unit.Recently the supplier informed Junior Company that a 20 percent increase will take effect next year.Junior has some additional space and could produce the units for the following per-unit costs (based on 30,000 units):
  If the units are purchased from the supplier, $200,000 of fixed costs will continue to be incurred.In addition, the plant can be rented out for $20,000 per year if the parts are purchased externally.
Required:
Should Junior Company buy the part externally or make it internally?

Accepted Answer

The answer of Junior Company currently buys 30,000 units of...

Question 11

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

Accepted Answer

A)  variable costs associated with the special order. 
B)  variable and fixed manufacturing costs associated with the special order. 
C)  variable and incremental fixed costs associated with the special order. 
D)  variable costs and incremental fixed costs associated with the special order plus the contribution margin usually earned on regular units.

Question 12

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

Accepted Answer

A)  $10,000 of direct labor used to manufacture the parts 
B)  $30,000 of depreciation on the plant used to manufacture the parts 
C)  the supervisor's salary of $25,000 that will be avoided if the part is purchased from an outside supplier 
D)  $15,000 in rent from leasing the production space to another company if the part is purchased from an outside supplier

Question 13

_______________ consists of choosing among alternatives with an immediate or limited end in view.

Accepted Answer

A)  Long-run decision making 
B)  Tactical decision making 
C)  Universal decision making 
D)  All of these

Question 14

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

Accepted Answer

The answer of Describe the steps in the decision-making process.What...

Question 15

Which of the following would be TRUE?

Accepted Answer

A)  Flexible Demand changes Irrelevant 
B)  Flexible Demand constant Irrelevant 
C)  Committed Demand increase > Unused capacity Not relevant 
D)  Committed Demand increase < Unused capacity Relevant

Question 16

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

Accepted Answer

A)  $9,000. 
B)  $8,500. 
C)  $19,000. 
D)  $27,000.

Question 17

Scott Company has an annual capacity of 18,000 units.Budgeted operating results for 2006 are as follows:
  A foreign wholesaler wants to buy 1,000 units at a price of $40 per unit.All fixed costs would remain within the relevant range.Variable selling costs on the special order would be the same as variable selling costs for regular orders.
Required:

Accepted Answer

The answer of Scott Company has an annual capacity of...

Question 18

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:  
-Which products should Manning process further?

Accepted Answer

A)  all 
B)  all except Z 
C)  X and Y 
D)  none

Question 19

Firms may be asked to accept a special order of their product for a reduced price if

Accepted Answer

A)  it can be concealed from the government. 
B)  excess capacity exists. 
C)  the order is small. 
D)  the plant is producing at maximum capacity.

Question 20

Which of the following items would be classified as committed resources (short-term)?

Accepted Answer

A)  salaried employees 
B)  depreciation on building 
C)  fuel to generate electricity internally 
D)  lease on machinery

Exam 17: Activity Resource Usage Model and Tactical Decision Making

The steps in the tactical decision making process are: What is the proper sequence of steps?

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 product margin for product M using ABC would be

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

Abbott 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: Which of these items is IRRELEVANT?

Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process.The joint costs amount to $200,000. - Which product(s) should be sold at split-off to maximize profits in the short run?

Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: An outside supplier has offered to sell the component for $12.75. What is the effect on income if Vest Industries purchases the component from the outside supplier?