Exam 22: Relevant Information and Decisions

Napa Company manufactures computers. The following cost information for the manufacture of one computer has been compiled: If Napa receives a special order for 500 computers at a price of $550, what will be the effect on the company's profit if the order is accepted? (Assume that other variables do not change.)

Which type of data might cause a manager to erroneously reject an order?

When using the contribution approach to set selling prices, the markup must cover:

Overland Company is planning on discontinuing one of its markets in Japan. The Japanese market has a contribution margin of $33,000. Fixed costs for the Japanese market are $55,000, 70% of which are unavoidable. What will be the effect on Overland's net income if the Japanese market is eliminated?

Which of the following qualitative factors should be considered in a make-or-buy decision?

Tarver Corporation makes stools and tables. The company can sell as many stools and tables as it can produce, but its machine-hour capacity is limited. Revenue and cost data for each unit are given as follows: It takes two machine hours to make a table and one machine hour per stool. Given this information, Tarver should:

The Crystal Clear Company makes three sizes of computer monitors: 15-inch, 17-inch, and 19-inch. Due to a labor strike, only 3,040 labor hours will be available next week. The direct labor wage rate is $10 per hour. The revenue and cost information for all three sizes are listed below: Given the units ordered for next week, how many of each monitor should Crystal produce to maximize profits?

Exhibit 22-6 Newell Company presently has three product lines: paper, stamps, and printer ink. The company is considering adding a new line of pens. Market research shows the following expected revenues and costs if the pen line were added: Refer to Exhibit 22-6. If Newell generally sets a markup of 20%, what is the lowest selling price that should be considered for the new pen line?

Evening theater tickets are probably more expensive than matinee tickets because:

Future costs that change as a result of a decision are:

A company should generally add a product line if:

When managers are deciding what price to charge for a special order, they should consider:

In a decision regarding whether or not to buy a new truck, the book value of the old truck usually is considered to be:

For which decision(s) would shipping costs be a differential cost?

Joint product costs are:

A cost important to the decision-making process but NOT recorded in conventional accounting records is called a(n):

You are the controller of Rugged Shoe Company. The company has excess snow boots in its inventory because of a mild winter season. A large retail store chain has offered to buy 10,000 pairs of these boots at a special price. The president of your company asks you to analyze the cost data for producing the boots and estimate a minimum selling price below which the order from the retail chain should not be accepted. Cost information for a pair of boots is as follows:

Exhibit 22-5 Imperial Company manufactures two types of fruit drinks, Tropical and Hawaiian. The company can sell as many bottles of each product as it can produce, but production is limited by the availability of direct labor hours. The revenues, costs, and labor hours for the two products are as follows: Refer to Exhibit 22-5. What is the contribution margin per 100 bottles of Hawaiian?

Which of the following statements is true when making product and process decisions?

When there is idle capacity, which costs are most likely to be IRRELEVANT?