Exam 19: Information for Decisions: Relevant Costs and Benefits

Opportunity cost may also be described as:

Criteria measured utilising quantitative terms include objectives such as:

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 net realisable value method had been used?

Which of the following statements about relevant information is/are true? i.For information to be relevant,it must relate to the future ii.For information to be relevant,it must differ between the alternatives. iii.For information to be relevant,it must be completely accurate.

Product costs incurred after the split-off point are called:

An opportunity costs is defined as:

One method of treating by-products is to:

Which of the following statements is/are true? i.Accurate but irrelevant information is still useful for decision making ii.Relevant,accurate,but not timely information is not useful in decision making. iii.Relevant information that is known to have some weaknesses in accuracy still is useful in decision making.

The method under which the relative magnitude of the final products' net realisable values is used to allocate the joint cost is the:

In order to be relevant to a decision,cost or benefit information must involve ________,rather than ________.

The most common trade-off in a decision situation is between information:

When deciding whether to accept a special order,spare or idle capacity is not a factor that needs to be taken into account.

Which of the following statements about the decision-making process is/are true? i.The first step in the decision-making process is to define or clarify a decision problem into clear terms that can be addressed ii.Before alternatives can be identified,the necessary data must first be collected. iii.After the alternatives are identified,the criterion on which a decision will be made must be specified.

When excess capacity exists,the only relevant cost associated with a special order will usually be which cost?

SloGrowth has idle capacity.They have received a special order for 2000 units at a price of $6 per unit.Currently production and sales are budgeted for 20 000 units without considering the special order.Budget information for the year is presented below.Cost of goods sold includes $20 000 of fixed manufacturing cost.Determine the effect on profit if the special order is accepted.

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 2000 units of X1000.The opportunity cost associated with taking this special order is:

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 is planning to downsize by focusing on the two most profitable products,Bepha and Gamta,while discontinuing Alta and Delma.Which of the following are the correct assessments of the relevance of the items listed?

Holt Pty Ltd presently makes 20 000 units of a certain part to use in production.The cost to make the part is $20 per unit including $15 in variable costs and $5 in fixed overhead applied.If Holt buys the part from Bricker,the cost would be $18 per unit and the released facilities could not be used for any other activity.Eighty per cent of the fixed overhead would continue.Determine the relevant costs to make the part.

Contribution margin per machine hour can be calculated by dividing:

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 A,instead of selling it at split-off?