Concept explainers
Concept introduction:
Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager’s decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.
Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.
Two basic types of the relevant costs are as follows:
- Out-of-pocket costs
- Opportunity costs
To indicate:
If the company should add decoration to Rosa umbrella
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Check out a sample textbook solutionChapter 7 Solutions
Managerial Accounting
- The Jabba Corporation manufactures the "Snack Buster" which consists of a wooden snack chip bowl with an attached porcelain dip bowl. Which of the following would be relevant in Jabba's decision to make the dip bowls or buy them from an outside supplier? Fixed overhead cost that can be eliminated if the bowls are purchased from the outside supplier The variable selling cost of the Snack Buster A) Yes Yes B) Yes No C) No Yes D) No No Multiple Choice Choice A Choice B Choice C Choice Darrow_forwardPrepare and present a computation which illustrates what price should be selected in order to maximize profits when The company is considering the launch of a new product, component TDX 489 with the following information: Standard cost per box Variable cost 6,20 fixed cost 1,60 Total 7,80 Market research forecast of demand Selling price 13 12 11 10 9 Demand box 5000 6000 7200 11200 13400 The company only has enough production capacity to make 7000 boxes. However, it would be possible to purchase product TDX 489 from a subcontractor at £7.75 per box for orders up to 5000 boxes and £7 per box if the orders exceed 5000 boxes.arrow_forwardUse this information for Carmen Co. to answer the question that follow. Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $23.05 per pound and costs $14.35 per pound to produce. Product D would sell for $40.95 per pound and would require an additional cost of $10.35 per pound to produce. What is the differential cost of producing Product D? a.$6.21 per pound b.$10.35 per pound c.$12.42 per pound d.$8.28 per poundarrow_forward
- International Paper is trying to find the best paper rolling machine to maximize sales volume. There are three machine options: Machine A, Machine B, and Machine C. Annual revenue is expected to be at one of three possible levels, High, $6 million; Medium, $3 million; or Low, $2 million; but is impacted by machine selection as the probabilities show in the table below: High Revenue Medium Revenue Low Revenue Machine A .1 .3 .6 Machine B .4 .4 .2 Machine C .5 .4 .1 Which machine should International Paper purchase to maximize the expected revenue, and wh sthe expected revenue? Group of answer choices Machine A, $2.7 million Machine B, $4.0 million Machine B, S4.6 million Machine C, $4.4 million none of the answers provided are correctarrow_forwardGold&Blue's Northern Division is currently purchasing a part from an outside supplier. The company's Southern Division, which has no excess capacity, makes and sells this part for external customers at a variable cost of P19 and a selling price of P31. If Southern begins sales to Northern, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by P3. On the basis of this information, Southern would establish a transfer price of: P20. P28. P23. P25.arrow_forwardThe Shine Company, which manufactures projection equipment, is ready to introduce a new line of portable projectors. The following data are available for a proposed model: Variable manufacturing costs Applied fixed manufacturing overhead Variable selling and administrative costs Applied fixed selling and administrative costs What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 235%? Multiple Choice $1,565.25. $1,700.25. $1,835.25. $2,060.25. None of these answer choices is correct. $ 440 220 175 190arrow_forward
- EvTel Kitchen Appliances accepts the offer from the Speakers department, they will adjust their production levels accordingly. Firstly, EvTel decided to produce only Low Option. Consider all of the production levels, sales, and production costs in Table A, answer the following questions. (Warning: EvTel Kitchen Appliances produces only Low Option for this part) 2 a) How much does it cost to produce and package one Evtel HighSound Combo Low Option? b) How much does producing and selling one HighSound Combo Low Option contribute to EvTel Kitchen Appliances' profit? c) Report the total yearly fixed cost of EvTel Kitchen Appliances.(Hint: Cost tables are given below) d) How many HighSound Combo Low Option should EvTel Kitchen Appliances sell in a year to make a net profit of 0 TL? (Remark: Round up to the nearest integer.)arrow_forwardThe Jabba Corporation manufactures the "Snack Buster" which consists of a wooden snack chip bowl with an attached porcelain dip bowl. Which of the following would be relevant in Jabba's decision to make the dip bowls or buy them from an outside supplier? A) B) C) D) Fixed overhead cost that can be eliminated if the bowls are purchased from the The variable selling cost of outside supplier the Snack Buster Multiple Choice O O O O Choice A Choice B Choice C Choice D Yes Yes No No Yes No Yes Noarrow_forwardMaking outsourcing decisions Cool Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: Another company has offered to sell Cool Systems the switch for $15.00 per unit. If Cool Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable.</p><p>Prepare an outsourcing analysis to determine whether Cool Systems should make or buy the switch.arrow_forward
- Suppose the capacity currently used to make CMCBs will become idle if Sunshine purchases CMCBs from Moonbeam. On the basis of financial considerations alone, should Sunshine make CMCBs or buy them from Moonbeam? Show your calculations. (If a box is not used in the table, leave the box empty; do not enter a zero.) Make Buy Total Per Unit Total Per Unitarrow_forwardThe Gargus Company, which manufactures projection equipment, is ready to introduce a new line of portable projectors. The following data are available for a proposed model: Variable manufacturing costs Applied fixed manufacturing overhead Variable selling and administrative costs Applied fixed selling and administrative costs $ 380 190 145 160 What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 205%?arrow_forwardLooking for the break-even point from the information provided. The Smiths need to develop an analysis of their breakeven point for the plastic display case based on sales of the product directly to the consumer as well as through retailers. If the product were sold to retailers, the price would have to provide retailers with an adequate markup. Exhibit C7.4 presents the expected cost structure for the Unique Display Cases display case developed by their accountant. Based on competitive prices, the Smiths expected to offer their product in direct to consumer sales for $24.99 plus $2.99 for shipping and handling. The price to retailers would have to be negotiated but would be 30–40% less to allow an adequate markup for the retail firms. The production cost of $7.50 was based on a production run of 5000 units in one color. At 10,000 or more units, production cost would drop to $5.75 per unit. The company that would produce the plastic unit had production capacity of 25,000 units a year.…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning