Exam 9: Relevant Costs for Decision Making

Which of the following would be considered joint products?

The process for making non-routine operating decisions

Assume the following cost data: A special order for 100 units is received. The buyer wants his name stamped on each unit. This will increase labor costs by $0.25 per unit and cost $300 for the stamping machine. What price must be charged to earn $300 on the special order?

Managers may choose to keep an unprofitable product if dropping it would adversely affect the sales of profitable products.

Which of the following is an opportunity cost that should be considered in an outsourcing decision?

The effect of production practices on the environment is an example of a qualitative factor to be considered in a non-routine operating decision.

In applying a relevant quantitative analysis technique to a non-routine operating decision, managers must

PRO Shops has a capacity of 45,000 units, and is currently producing and selling 40,000 at $25 a unit. The present cost structure, on a per unit basis, is: An order for 7,000 units has been received from a Japanese company at a price of $20 per unit. If the order is accepted, profit will

Growe Company manufactures sewing machines and requires 30,000 units of a component that is used in the manufacturing process. If Growe buys the part from Zigler Brothers, the plant will be idle. Of the fixed, 55% overhead will continue regardless of the decision. The cost to buy the part from Zigler is $46. The unit cost to make the part is: Relevant costs to make the part are

For which of the following decisions is vendor reliability a major uncertainty?

Emphasising products with higher contribution margins assumes that fixed costs are unaffected by product mix.

Strategic plans require managers to emphasise products that generate the highest short-term profit.

Depreciation on existing equipment is special decision making is regarded as:

General decision rules associated with outsourcing decisions assume the organisation's goal is to

Non-routine operating decisions rarely require analysis of qualitative factors.

N.G., Ltd. currently buys 9,000 subcomponents from an outside supplier at $10 each. The company has excess capacity, which it sublets to another company for $20,000 per year. If the company were to use the idle capacity to produce the subcomponent internally, it would incur variable production costs of $6 per unit, and it would hire a new supervisor for $15,000 per year. Other fixed overhead costs would not change, but the average overhead cost per subcomponent unit would be $2. What is the advantage or disadvantage (in dollars) if N.G. makes the subcomponent instead of continuing to buy outside and subletting the excess capacity?

Wolff Ltd. sells product P at a price of $38 a unit. The per-unit cost data are: direct materials $8, direct labor $10, and overhead $12 (25% fixed and 75% variable). Wolff has sufficient capacity to accept a special order for 40,000 units just received. Selling costs associated with this order would be $3 per unit. At a selling price of $33 per unit, the operating profit will

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

Amsat has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: Which product should be emphasised last?

Which of the following is the best definition of a qualitative factor?