Exam 19: Incremental Analysis

Decision-making involves choosing among alternative courses of action.

Tasty Bites produces corn chips. The cost of one batch is below: Direct materials \ 18 Direct labor 13 Variable overhead 11 Fixed overhead 14 An outside supplier has offered to produce the corn chips for $30 per batch. How much will Tasty Bites save if it accepts the offer?

It costs Dryer Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 5,000 units at $21 each. Dryer would incur special shipping costs of $2 per unit if the order were accepted. Dryer has sufficient unused capacity to produce the 5,000 units. If the special order is accepted, what will be the effect on net income?

Alvarez Company is considering the following alternatives: Alternative A Alternative B Revenues \ 50,000 \ 60,000 Variable costs 30,000 30,000 Fixed costs 10,000 16,000 What is the incremental profit?

Use the following information for questions Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: Direct materials \ 55,000 Direct labor 160,000 Variable overhead 75,000 Fixed overhead 175,000 If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable. -What is the relevant cost per unit of part A12E?

Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?