Exam 12: Relevant Costs for Decision Making

If Varone can expect to sell 32,000 Homs next year through regular channels,at what special order price from Fairview should Varone be economically indifferent between either accepting or not accepting this special order?

Suppose that total regular sales of jigs are 85,000 units per month,and all other conditions remain the same.If Immanuel accepts the special order,what will be the change in monthly operating income?

What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 40,000 units required each year?

Opportunity costs are recorded in the accounts of an organization.

(Appendix 12A)The absorption costing approach to cost-plus pricing will result in attaining the company's required rate of return only if forecasted unit sales are realized,holding all other things constant.

Using the profitability index,it is easy to decide which product is less profitable and should be de-emphasized.

If Immanuel accepts this special order,what will be the increase in the monthly operating income?

(Appendix 12A)Timax Company,a manufacturer of moderately priced time pieces,would like to introduce a new electronic watch into the market.To compete effectively,the watch could not be priced at more than $50.The company requires a return on investment of 25% on all new products.The plan is to produce and sell 20,000 watches each year.This would require a $500,000 investment.What would be the target cost per watch?