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Exam 30: Cost-Revenue Analysis for Decision Making

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Question 51

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Income statements prepared on a(n) ____________________ costing basis usually provide data in a form more useful for internal decision making.

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verified

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Question 52

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The difference between revenue and variable costs is referred to as the __________________.

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Question 53

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Which of the following would not be relevant to a decision about whether to continue making a part or whether to buy it from an outside supplier?

Which of the following is the first step in the decision-making process?

A company has sales of $100,000, ending finished goods inventory of $9,000, variable manufacturing costs of $50,000, and fixed manufacturing costs of $28,000 for the year. Assuming the company uses direct costing, the manufacturing margin for the year is

The following information relates to the purchase of new machine being considered. $\begin{array} { l r r } & \text { New Machine } & \text { Old Machine } \\\text { Direct Material per unit } & \$ 4.32 & \$ 4.36 \\\text { Direct Labor per unit } & 4.90 & 4.95 \\\text { Variable manufacturing overhead per unit } & .36 & .37 \\\text { Variable Selling per unit } & 11.97 & 10.47 \\\text { Fixed overhead total } & 36,000 & 33,000 \\\text { Book value } & & 52,000 \\\text { Cost of new equipment (12 year life) } & 246,000 &\end{array}$ The new machine would enable the company to make 13,500 units per year. The current capacity of 12,000 is based on the maximum number of units that the old machine can produce. The company has had to turn down orders in the past few years due to this limit on capacity and estimates that it can sell as many of the product as it can produce. The sales price per unit of the product is $34.50. Determine the relevant data. Pose one addition consideration regarding this decision.

Under ____________________ costing, a portion of fixed manufacturing overhead is deferred to future periods as part of the inventory value.

Earnings or potential benefits foregone because a certain course of action is taken are called ____________________ costs.

Analyze the following divisions of Johannes' Clothing Company. Management has to make a decision whether to close one of the divisions or keep both open. Make a recommendation to management based on the information given. Of the fixed costs, parts are controllable within the divisions, but $31,000 of the total are company headquarters fixed costs. Of these, $16,000 are allocated to the Skirt Division and $15,000 to the Shirt Division. $\begin{array} { l r r r } & \text { Skirt } & \text { Shirt } & \text { Total } \\\text { Sales } & \$ 102,000 & \$ 89,000 & \$ 191,000 \\\text { Variable manufacturing costs } & 57,120 & 53,400 & 110,520 \\\text { Variable selling costs } & 4,600 & 3,700 & 8,300 \\\text { Fixed costs (manufacturing and selling) } & 38,200 & 35,300 & 73,500\end{array}$

Which of the following should NOT be a consideration when deciding whether to make or buy a part?