FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Differential Analysis: the Key to Decision Making

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 121

Multiple Choice

Review LaterAdd Note

Review Later

Dock Corporation makes two products from a common input. Joint processing costs up to the split-off point total $33,600 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: What is the financial advantage (disadvantage) for the company of processing Product Y beyond the split-off point?

A) $9,600
B) $2,400
C) $33,600
D) $26,400

E) B) and C)
F) B) and D)

Correct Answer

verified

Show Answer

Question 122

Essay

Review LaterAdd Note

Review Later

Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 12,000 medals each month; current monthly production is 9,600 medals. The company normally charges $99 per medal. Cost data for the current level of production are shown below: The company has just received a special one-time order for 500 medals at $89 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.Required:Should the company accept this special order? Why?

Correct Answer

verified

Only the direct materials and direct lab...

View Answer

Show Answer

Question 123

Multiple Choice

Review LaterAdd Note

Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for $109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.From a value-based pricing standpoint what range of possible prices should Tavis consider when setting a price for FI-73?

Hilfiger Industries Incorporated has developed a new forklift, model UH-40, that is designed to offer superior performance to a comparable forklift sold by Hilfiger's main competitor. The competing forklift sells for $96,000 and needs to be replaced after 1,000 hours of use. It also requires $9,000 of preventive maintenance during its useful life. Model UH-40's performance capabilities are similar to the competing product with two important exceptions-it needs to be replaced only after 2,000 hours of use and it requires $13,000 of preventive maintenance during its useful life.From a value-based pricing standpoint what is model UH-40's economic value to the customer over its 2,000 hour life?

Hill Corporation is contemplating the introduction of a new product. The company has gathered the following information concerning the product: The company uses the absorption costing approach to cost-plus pricing as described in the text.Required:a. Compute the markup on absorption cost.b. Compute the selling price.c. If the price computed in "b" above is charged, and costs turn out as projected, can the company be assured that no loss will be sustained on the new product? Explain.

Olivier Industries Incorporated has developed a new instrument, model AG-06, that is designed to offer superior performance to a comparable instrument sold by Olivier's main competitor. The competing instrument sells for $74,000 and needs to be replaced after 1,000 hours of use. It also requires $7,000 of preventive maintenance during its useful life. Model AG-06's performance capabilities are similar to the competing product with two important exceptions-it needs to be replaced only after 4,000 hours of use and it requires $14,000 of preventive maintenance during its useful life.From a value-based pricing standpoint what is the differentiation value offered by model AG-06 relative to the competitor's offering for each 4,000 hours of usage?

Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 8,300 units of the part that are needed every year. An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $4,500 of these allocated general overhead costs would be avoided. In addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an additional segment margin of $17,000 per year for that product.Required:a. Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company.b. Which alternative should the company choose?

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:

Mcniff Corporation makes a range of products. The company's predetermined overhead rate is $28 per direct labor-hour, which was calculated using the following budgeted data: Management is considering a special order for 200 units of product O96S at $122 each. The normal selling price of product O96S is $149 and the unit product cost is determined as follows: If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.Required:The financial advantage (disadvantage) for the company as a result of accepting this special order would be:

Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $5.55 per hour, and sells for $128,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $3.55 per hour. Tavis has not yet established a selling price for model FI-73.From a value-based pricing standpoint what range of possible prices should Tavis consider when setting a price for FI-73?

Turnhilm, Incorporated is considering adding a small electric mower to its product line. Management believes that in order to be competitive, the mower cannot be priced above $139. The company requires a minimum return of 25% on its investments. Launching the new product would require an investment of $8,000,000. Sales are expected to be 40,000 units of the mower per year.Required:Compute the target cost of a mower.

Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to outperform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $5.25 per hour, and sells for $122,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $3.25 per hour. Tavis has not yet established a selling price for model FI-73.From a value-based pricing standpoint what is FI-73's economic value to the customer over its 30,000 hour useful life?

An avoidable cost is a sunk cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another.

An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data concerning those products appear below: Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.(Round your intermediate calculations to 2 decimal places.)

Kingsford Pure Water Solutions Corporation has developed a new water purification system-model PC-97-that has been designed to outperform a competitor's best-selling water purification system. Model PC-97 has a useful life of 100,000 hours of service and its operating cost is $0.70 per hour. In contrast, the competitor's product has a useful life of 20,000 hours of service and operating costs that average $1.00 per hour. The competitor's water purification system sells for $149,000. Kingsford has not yet established a selling price for model PC-97. Required: From a value-based pricing standpoint what range of possible prices should Kingsford consider when setting a price for model PC-97?

The following information relates to next year's projected operating results of the Children's Division of Grunge Clothing Corporation: If the Children's Division is eliminated, $170,000 of the above fixed expenses could be avoided. The annual financial advantage (disadvantage) for the company of eliminating this division should be:

Fabri Corporation is considering eliminating a department that has an annual contribution margin of $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $25,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:

Swagger Corporation purchases potatoes from farmers. The potatoes are then peeled, producing two intermediate products-peels and depeeled spuds. The peels can then be processed further to make a cocktail of organic nutrients. And the depeeled spuds can be processed further to make frozen french fries. A batch of potatoes costs $42 to buy from farmers and $12 to peel in the company's plant. The peels produced from a batch can be sold as is for animal feed for $24 or processed further for $17 to make the cocktail of nutrients that are sold for $44. The depeeled spuds can be sold as is for $35 or processed further for $24 to make frozen french fries that are sold for $56.Required:a. Assuming that no other costs are involved in processing potatoes or in selling products, how much money does the company make from processing one batch of potatoes into the cocktail of organic nutrients and frozen french fries?b. Should each of the intermediate products, peels and depeeled spuds, be sold as is or processed further into an end product?

In a decision to drop a product, the product should be charged for rent in proportion to the space it occupies even if the space has no alternative use and the rental payment is unavoidable.

Cranston Corporation makes four products in a single facility. Data concerning these products appear below: The milling machines are potentially the constraint in the production facility. A total of 28,200 minutes are available per month on these machines.Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round your intermediate calculations to 2 decimal places.)