Exam 11: Tactical Decision Making

Which of the following would be classified as committed long-term resources?

The Titanic hit an iceberg and sank.In deciding whether or not to salvage the ship,what is its book value?

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

What is the term for a decision to make or eliminate an unprofitable product?

Arcadia,Inc.,uses a joint process to produce Products W,X,Y,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 $200,000.Other relevant data are as follows: Sales Value of Final \ 40,000 \ 24,000 \ 70,000 16,000 10,000 20,000 20,000 10,000 48,000 a.Determine which products should be processed further. b.How will processing each product further affect profits?

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: Direct materials 15 Direct labour 40 Variable manufacturing rverhead 10 Fixed manufacturing cverhead 35 Total \1 00 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. a.Determine the maximum amount per unit James should pay an outside supplier. b.Indicate if the company should make or buy the component and the total dollar difference in favour of that alternative. c.Assume the company could eliminate production supervisors with salaries totalling $30,000 if the component is purchased from an outside supplier.Indicate if the company should make or buy the component and the total dollar difference in favour of that alternative.

What are foreign trade zones?

The following information relates to a product produced by Creamer Company: Direct materials \ 24 Direct labour 15 Variable overhead 30 Fixed overhead 18 Unit cost \ 87 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. What is the incremental cost per unit associated with the special order?

The following information pertains to Ewing Company's three products: $\begin{array}{lrrrr}& \underline{\text { D }}&\underline{E} &\underline{F} \\\text { Unit sales per month } & \underline{900} & \underline{1.400} & \underline{800} \\\\\text { Selling price per unit } & \$ 6.00 & \$ 11.25 & \$ 7.50 \\\text { Variable costs per unit } & \underline{3.00} & \underline{9.00} & \underline{7.80} \\\text { Unit contribution margin } & \$ 3.00 & \$ 2.25 & \$(0.30\end{array}$ -Assume that product F is discontinued and the space is used to produce E.Product E's production is increased to 2,200 units per month,but E's selling price of all units of E is reduced to $10.20.What will be the effect on monthly profits?

Miller Company produces speakers for home stereo units.The speakers are sold to retail stores for $30.Manufacturing and other costs are as follows: Variable costs per unit: Fixed costs per month: Direct materials \ 9.00 Factory overhead \ 120,000 Direct labour 4.50 Selling and admin. Factory overhead 3.00 Total \ 180,000 Distribution 1.50 Total \ 18.00 The variable distribution costs are for transportation to the retail stores.The current production and sales volume is 20,000 per year.Capacity is 25,000 units per year. - A Tennessee manufacturing firm has offered a one-year contract to supply speaker parts at a cost of $6.00 per unit.If Miller Company accepts the offer,it will be able to reduce variable costs by 30 percent and 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 Miller Company buys from the Tennessee firm?

Miller Company produces speakers for home stereo units.The speakers are sold to retail stores for $30.Manufacturing and other costs are as follows: Variable costs per unit: Fixed costs per month: Direct materials \ 9.00 Factory overhead \ 120,000 Direct labour 4.50 Selling and admin. Factory overhead 3.00 Total \ 180,000 Distribution 1.50 Total \ 18.00 The variable distribution costs are for transportation to the retail stores.The current production and sales volume is 20,000 per year.Capacity is 25,000 units per year. - The speakers are currently unpackaged.Packaging them individually would increase costs by $1.20 per unit.However,the units could then be sold for $33.00.All other information remains the same as the original data.What is the effect on profits if Miller Company packages the speakers?

Which of the following represents an accurate relationship between costs,their relationships,and the relevant classification?

What is a decision to make a component internally versus through a supplier?

Reggie Corporation manufactures a single product with the following unit costs for 1,000 units: Direct materials \ 2,400 Direct labour 960 Factory overhead (30\% variable) 1,800 Selling expenses (50\% variable) 900 Administrative expenses (10\% variable) \ 80 Total per unit \ 6,900 Recently,a company approached Reggie Corporation about buying 100 units for $5,100 each.Currently,the models are sold to dealers for $7,800.Reggie Corporation's capacity is sufficient to produce the extra 100 units.No additional selling expenses would be incurred on the special order. -Refer to the figure.How much will income change if the special order is accepted?

What is the term for a decision that focuses on whether a specially priced order should be accepted or rejected?

The operations of Knickers Corporation are divided into the Pacers Division and the Bulls Division.Projections for the next year are as follows: Pacers Bulls Division Division Total Sales \ 420,000 \ 252,000 \ 672,000 Variable costs 147,000 115,500 262,500 Contribution margin \ 273,000 \ 136,500 \ 409,500 Direct fixed costs 126,000 105,000 231,00 Segment margin \ 147,000 \ 31,500 \ 178,500 Allocated common costs 63,000 47,250 110,250 ting income (loss) \ 84,000 \ 15,750 \6 8,250 What would be the operating income for Knickers Corporation as a whole if the Bulls Division were dropped?

Rippey Corporation manufactures a single product with the following unit costs for 5,000 units: Direct materials \ 60 Direct labour 30 Factory overhead (40\% variable) 90 Selling expenses ( 60\% variable) 30 Administrative expenses ( 20\% variable) \ Total per unit Recently,a company approached Rippey Corporation about buying 1,000 units for $225.Currently,the models are sold to dealers for $412.50.Rippey's capacity is sufficient to produce the extra 1,000 units.No additional selling expenses would be incurred on the special order. a.What is the profit earned by Rippey Corporation on the original 5,000 units? b.Should Rippey accept the special order if its goal is to maximize short-run profits? How much will income be affected? c.Determine the minimum price Rippey would want to receive in order to increase profits by $7,500 on the special order. d.When making a special order decision,what qualitative aspects of the decision should Rippey Corporation consider?

Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to $200,000. $\text { If Processed Further }$ Sales Value Additional 1 3,000 \ 10,000 \ 2,500 \ 15,000 2 5,000 30,000 3,000 35,000 3 4,000 20,000 4,000 25,000 4 6,000 40,000 6.000 45,000 -Refer to the figure.If Product B2 is processed further,what will be the effect on profits?

What are the quantitative factors that should be considered when evaluating a make-or-buy decision?

What is a tactical decision?