Exam 11: Relevant Costs for Decision Making

When by-product value is recognised at the time of production, the joint costs of the main product are reduced by the net realisable value of the by-product.

Typically by-products make a substantial contribution to profitability.

There are likely to be ______________ uncertainties in a special order from a new customer rather than an existing customer.

The constant gross margin NRV method best reflects the inseparability of the joint production process.

One way to deal with capacity constraints is to incur additional costs to relax the constraint.

Because non-routine operating decisions are common, managers use a standard decision process for addressing them.

Product quality should be considered in make or buy decisions.

The constant gross margin NRV method allocates joint costs so that the gross margin percentage for each main product is identical.

Ethical standards are not a factor in non-routine operating decisions.

Kintectics Ltd can manufacture 480,000 electrical pumps a year at a variable cost of $15 per pump and fixed costs of $500,000. Kintectics Ltd budgeted that it can sell 400,000 at $25 each. An additional order of 100,000 was received, but at a discount of 35% from the regular price. If Kintectics Ltd accepts the special order, profit before taxes will:

Finders Company manufactures sewing machines and requires 60,000 units of a component that is used in the manufacturing process. If Flinders buys the part from Serrano Brothers, the plant will be idle. Of the fixed overhead, 45% will continue regardless of the decision. The cost to buy the part from Serrano Brothers is $46. The unit cost to make the part is: Direct materials \ 12 Direct 1abor 20 Variable overhead 12 Average fixed overhead Total Which alternative is more profitable and by what amount?

Jane is employed at an annual salary of $55,000. She plans to start her own business as a private investigator. If she chooses to open the new business, Jane's foregone salary is a (an):

Yvonne and Ken own and operate Deluxe Housecleaning Service. Which of the following is a qualitative factor associated with dropping carpet cleaning from their current line of services?

If an organisation cannot deliver goods or services quickly because of a constraint, managers might relax that constraint to:

In making a decision to drop a product line, variable costs are:

Opportunity costs for insourcing include the contribution margin foregone from using the capacity for a new product.

Positive financial outcomes should always override qualitative factors.

Make or buy decisions refer to choosing between outsourcing or utilising internal resources.

The net realisable value method allocates joint costs using the relative value of main products, taking into account the additional sales value and costs incurred after joint production ends.

The process for making non-routine operating decisions starts with special orders.