Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 9Q
To determine
Whether it is relevant to the manager’s decision.
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An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $81. As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision.
Alternative
Fixed Costs
Variable Costs per Unit
A
$100,000
$54
B
$272,000
$31
C
$560,000
$20
Recommended: graph each alternative with units on the x-axis and $ on the y-axis. Also, include revenue on the chart. Identify the break-even points and points of indifference.
a. Mr. Smith, the financial controller of LabAid, is convinced that the step-down method allocates more costs to the operating departments than does the direct method. Do you agree with Mr. Smith? Explain.
b. Assume that you are the manager of the Daily Patient department. Discuss which method of cost allocation would you prefer. Justify your decision.
An operations manager is deciding on the level of automation for a new process.
The fixed cost for automation includes the equipment purchase price, installation,
and initial spare parts. The variable costs per unit for each level of automation
are primarily labor related. Each unit can be sold for $90. As in many cases, you
have the default alternative of doing nothing ($0 fixed cost, $0 variable costs).
Hint: For these questions, also consider the "Do Nothing" option as a viable option when
making your decision.
Alternative Fixed
Costs
A
B
C
$100,000
$268,000
$560,000
Variable Costs per
Unit
$54
$30
$20
Recommended: graph each alternative with units on the x-axis and $ on the y-axis.
Also, include revenue on the chart. Identify the break-even points and points of
indifference. For help on this, see the video posted in Moodle.
When comparing Alternative B to Alternative C, C is the most attractive option above
units.
DO NOT INCLUDE A COMMA. Round your answer to the nearest whole…
Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
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