Exam 19: Information for Decisions: Relevant Costs and Benefits

Lido Products produces two products (A and B)from a joint process.The joint cost of production is $80 000.Five thousand units of Product A can be sold at split-off for $20 per unit or processed further at an additional cost of $20 000 and sold for $25 per unit.Ten thousand units of Product B can be sold at split-off for $15 per unit or processed further at an additional cost of $20 000 and sold for $16 per unit.What is the difference in profit if Lido decides to process further Product B,instead of selling it at split-off?

When a department or a product is showing a loss after all costs have been traced and allocated,a company has no option but to make the decision to either close the department or drop the product.

An appropriate way to account for by-products is to:

The joint cost allocation method that recognises the revenues at split-off but does not consider any further processing costs is the:

In decision making,opportunity costs are:

Which of these statements about joint cost allocation is false?

Rapid Growth Pty Ltd is presently operating at full capacity.They received a special order that,if accepted,would require refusing some sales to regular customers.Which of the following factors should management consider when making their decision? Variable costs of special order Fixed costs of equipment Opportunity costs

Decision problems involving accounting data are specified in:

North Central Publishing is considering outsourcing its printing process.Which of the following are relevant for this outsourcing decision? I The rent associated with the free-up space when the printing equipment is sold Ii supplier's financial stability Iii the carrying amount of the printing equipment

Kragle Ltd manufacturers a number of specialised electronic components,including the advanced X1000.Kragle Ltd has the capacity to produce 10 000 units of X1000 per year.Currently it is operating at 80 per cent capacity.The selling price for X1000 is $100 per unit.The variable cost per unit is $30.Fixed cost allocated to producing X1000 is $200 000 per year.Kragle Ltd receives a special order for 3000 units of X1000.The opportunity cost associated with taking this special order is:

Consider the situation where an activity-based costing system is in use rather than a conventional volume-based costing system.Which of the following statements is/are true?

Generally,joint costs are not relevant in decision making after split-off because:

A firm incurs manufacturing costs totalling $240 000 in process 1 to produce the following three beverages emerging from that process at the split-off point.Apple juice: sold immediately it emerges from Process 1 without further processing for $0.70 litre Apple cider: processed further in Process 2 at an additional cost of $0.66667 litre,then sold for $1.50 litre Apple pulp: processed further in Process 3 at an additional cost of $1.50 litre,then sold for $3.50 litre The following data relates to the period in which the joint costs were incurred.What is the amount of joint cost that would be allocated to apple juice if the relative sales value method had been used?

Zoota Ltd makes four products: Alta,Bepha,Delma and Gamta.The selling price and per unit costs are show below.*Alta and Delma share the same factory;therefore,monthly rent is allocated equally between the two products.Other allocated monthly fixed costs include administrative costs,which are allocated based on a $2/unit charge.Zoota Ltd decides to drop Delma because it is unprofitable.Christina Bobo,the management accountant of Zoota Ltd,suggests that by dropping Delma the company can save $1 x 5000 = $5000 a month.Your assessment of Christina's suggestion is:

The joint cost allocation method that is not based on the economic characteristics of the joint products is the:

A special order generally should be accepted if:

C Limited produces two products (A and B)from a particular joint process.Each product may be sold at split-off or may be further processed.Joint production costs for the year amounted to $60 000.Sales values and costs are as follows.If the joint production costs were assigned using the net realisable value method,the joint costs allocated to B would be:

A firm currently makes a component,and requires 30 000 for the coming year's production.Another supplier has offered the part at a delivered price of $3 per unit.It would cost $3000 to check purchased units for quality.Product costs per unit for the past year were $2.35 variable,and $1 fixed based on 30 000 units.If the component was bought,fixed overhead would be reduced by $6000,the cost of leasing specialised equipment.The space vacated by the equipment can be rented for $4000 for the year.Which of the following statements is the correct quantitative analysis of the make or buy decision?

What term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?

For which of the following should joint costs and joint cost allocations not be used?