Deck 5: Cost Accounting Has Purpose

Question 1

The decision-making framework for an organization consists of how many steps?

A) Three
B) Four
C) Five
D) Six

Answer 1

Five

Question 2

You have been provided with the following steps for an organization's decision-making framework. What is the appropriate order for the steps?
1) Calculate relevant costs and benefits for each option.
2) Implement your decision.
3) Clearly outline the problem and its related unknowns.
4) Select the option that maximizes the benefit to the organization and meets required qualitative criteria.
5) Identify suitable options and gather relevant qualitative and quantitative information, making informed assumptions as need be.

A) 5, 3, 1, 2, 4
B) 3, 5, 1, 4, 2
C) 3, 1, 5, 4, 2
D) 1, 3, 5, 4, 2

Answer 2

3, 5, 1, 4, 2

Question 3

After implementing a chosen option in the decision-making framework, the next natural step is to

A) assess how the decision worked and to learn from it.
B) move on to additional problems that needed to be resolved.
C) set new goals and objectives that will require the use of the decision-making framework.
D) identify the stakeholders in the decision and determine the financial impact of the chosen option.

Answer 3

assess how the decision worked and to learn from it.

Question 4

Which of the following statements is true regarding the application of the decision-making framework?

A) Since qualitative factors are difficult to measure in financial terms, they should not be considered in the decision-making framework.
B) Only quantitative factors should be considered in the decision-making framework since they can be measured accurately.
C) All qualitative and quantitative information that a company has should be used to evaluate a decision.
D) Relevant qualitative and quantitative information should be gathered and evaluated when applying the decision-making framework.

Question 5

What is the first step in the decision-making framework?

A) Identify suitable options.
B) Gather relevant quantitative and qualitative information regarding the decision.
C) Clearly outline the problem and its related unknowns.
D) Calculate relevant costs and benefits of each option.

Question 6

Precision Products is considering automating its manufacturing process. Currently, the manufacturing process is handled by 5 laborers which operate the machines with annual salaries and wages of $176,000. Annually, direct materials used in production total $73,000, manufacturing overhead associated with production totals $52,000, and marketing costs of $29,000, would remain the same under each option. If Precision automates its factory production, it will eliminate $120,000 of its labor costs, but will also incur $95,000 of machine leasing costs annually. Which of the following costs would be considered relevant in the decision-making framework?

A) Direct materials cost of $73,000
B) Manufacturing overhead costs of $52,000
C) Machine leasing costs of $95,000
D) Marketing costs of $29,000

Question 7

What is the last step in the decision-making framework?

A) Identify suitable options.
B) Gather relevant quantitative and qualitative information regarding the decision.
C) Implement your decision.
D) Calculate relevant costs and benefits of each option.

Question 8

In decision-making, relevant information pertains

A) only costs.
B) only revenues.
C) either revenues and/or costs.
D) neither revenues nor costs, but only qualitative data.

Question 9

Which of the following depicts the correct flow of the steps in the decision-making framework?

A) Identify suitable options?Gather relevant qualitative and quantitative information ?Calculate relevant costs and benefits for each option?Clearly outline the problem? Select the option that maximizes the benefit to the organization
B) Clearly outline the problem?Identify suitable options?Gather relevant qualitative and quantitative information?Calculate relevant costs and benefits for each option?Select the option that maximizes the benefit to the organization
C) Gather relevant qualitative and quantitative information? Identify suitable options?Clearly outline the problem?Calculate relevant costs and benefits for each option?Select the option that maximizes the benefit to the organization?Identify suitable options
D) Calculate relevant costs and benefits for each option ? Clearly outline the problem ? Identify suitable options?Gather relevant qualitative and quantitative information ?Select the option that maximizes the benefit to the organization

Question 10

After identifying suitable options and gathering relevant qualitative and quantitative information, a manager would then proceed to which step in the decision-making process?

A) Clearly outline the problem and the related unknowns.
B) Calculate relevant costs and benefits for each option.
C) Implement the choice you feel is the best option.
D) Select the option that maximizes the benefit, and meets the qualitative criteria.

Question 11

Which of the following statements is true regarding the decision-making framework?

A) Only management will need to make effective decisions to help meet an organization's profit goal without any regard to time or money spent to achieve them.
B) Only management will need to make effective decisions to help meet an organization's profit goals while minimizing the time spent to achieve them.
C) Whether as an employee, manager or entrepreneur, you will need to make effective decisions to help meet an organization's profit goals while minimizing the time spent to achieve them.
D) Whether as an employee, manager or entrepreneur, you will need to make effective decisions to help meet an organization's profit goals without any regard to time or money spent to achieve them.

Question 12

When calculating relevant costs and benefits in the decision-making framework, if an option or alternative is being considered and it is expected that there will be no changes to the existing capacity, which of the following costs would not change in the decision to choose one option over the other?

A) Total costs
B) Variable costs
C) Relevant costs
D) Fixed costs

Question 13

If managers are presented with challenges, they should figure out a solution by

A) applying the decision-making framework.
B) using only data analytics.
C) considering every possible option regardless of the time and money spent to arrive at a solution.
D) hiring an outside management consulting firm with expertise related to the challenge.

Question 14

Cost accounting

A) focuses only on identifying relevant costs in decision making.
B) supports management decision-making.
C) emphasizes on quantitative information in the decision-making framework.
D) will always result in the optimal decision when applying the decision-making framework.

Question 15

Differential costs are the same as

A) unavoidable costs.
B) non-relevant costs.
C) incremental costs.
D) sunk costs.

Question 16

Which of the following costs is not relevant in the decision-making process?

A) Incremental costs
B) Avoidable costs
C) Differential costs
D) Unavoidable costs

Question 17

Which of the following costs is relevant in the decision-making process?

A) Unavoidable costs
B) Sunk costs
C) Incremental costs
D) Past costs

Question 18

A cost which differs in amount between one choice and another is called a(n)

A) sunk cost.
B) differential cost.
C) unavoidable cost.
D) past cost.

Question 19

Relevant costs

A) assist in making a decision by helping dismiss other costs.
B) do not matter to a particular decision.
C) do not change from decision to decision.
D) are always the same for each situation/problem.

Question 20

In the decision-making process, relevant costs ______________.

A) are treated the same as past costs.
B) occur in the future.
C) are sunk costs.
D) are always unavoidable.

Question 21

Sunk costs are the same as

A) relevant costs.
B) avoidable costs.
C) incremental costs.
D) past costs.

Question 22

Which of the following costs would not be included in the evaluation of alternatives in the decision-making process?

A) Sunk costs
B) Opportunity costs
C) Relevant costs
D) Avoidable costs

Question 23

Fern's Florist is considering the purchase of a new delivery van since its old van has required numerous repairs. Last year, the old van required an engine overhaul with a cost of $5,000. This year, it is anticipated that the old van will require additional repairs with an estimated cost of $2,500. Fern can purchase a new van for $35,000 or the business can lease a new van with a down-payment of $3,900 and monthly lease payments of $320. Which of the cost presented in this decision would be considered a sunk cost?

A) Engine overhaul of $5,000 last year
B) Anticipated repairs for old van of $2,500
C) New van purchase of $35,000
D) Lease down-payment of $3,900

Question 24

How would a decision be made in the decision-making framework if two or more options have both relevant revenues and relevant expenses for each option?

A) Compare only the relevant expenses of each option.
B) Compare only the relevant revenues of each option.
C) Determine the net effect of each option (revenue less expenses) and then compare them.
D) Priority is given to the larger difference in the comparison (either expenses or revenues) to determine which option is most beneficial.

Question 25

Corner Cupcakes is considering the purchase of a new machine for its bakery. It can purchase the new machine at a cost of $10,000. For the existing machine, last year, the bakery spent $3,200 on machine repairs, an additional $1,900 on add-ons, and $2,700 for a software upgrade. How much of the given costs is relevant to the decision to purchase the new machine for the bakery?

A) $5,100
B) $7,800
C) $10,000
D) $17,800

Question 26

Community College of Puxton Park (CCPP) is trying to determine if it is more cost effective to reimburse employees for mileage in traveling to educational conferences or should the college purchase a vehicle to be used for employee travel to conferences. The following information has been provided with regards to the decision: Given the quantitative information for the two options, which option would you select as most beneficial to CCPP and why?

A)The option to continue mileage reimbursement should be selected since it will only cost $16,240 whereas, the option for the new vehicle will cost $31,500.
B) The option to continue mileage reimbursement should be selected since it will only cost $16,240 whereas, the option for the new vehicle will cost $28,000.
C) The option to purchase the new vehicle should be selected with a total annual cost of $9,100 whereas, the option to continue mileage reimbursement will cost $16,240.
D) The option to purchase the new vehicle should be selected with a total annual cost of $5,600 whereas, the option to continue mileage reimbursement will cost $16,240.

Question 27

In problem-solving with the decision-making framework, one

A) must only use the total cost approach since it is the most comprehensive approach.
B) must only use the relevant cost or the differential approach since it isolates specifically what changes and what does not change.
C) can use either the total cost approach or the relevant cost approach, since the end result will be the same using either method.
D) should use the total cost approach since it is less tedious and less time consuming to compute, and is also, more accurate with a final result.

Question 28

Which of the statements below is correct with regards to relevant costs and relevant information?

A) Every relevant cost happens not only in the future, but also includes what happened in the past.
B) Every relevant cost happens in the future, but not every future cost will be relevant to the current decision to be made.
C) Relevant costs include both avoidable and unavoidable costs in evaluating options.
D) The relevant cost approach focuses on what remains the same among the alternative instead of what changes.

Question 29

Corner Cupcakes Co. has two new bakery products to consider marketing. The first product, a Mango Munchie, is expected to be sold for $4.00 each with a related product cost of $1.50 per unit. The projected sales in units for the Mango Munchie is 2,000 per month. The second product is a Cosmo Cookie, which will sell for $3.50 each with a related product cost of $1.30 per unit. The projected sales in units for the Cosmo Cookie is 2,500 per month. Assuming that Corner Cupcakes Co. can only select one of these new bakery products to market and sell, which product should it select and why?

A) Mango Munchie should be sold since it has the lowest total cost to produce.
B) Cosmo Cookie should be sold since it has the highest revenues generated from sales.
C) Cosmo Cookie should be sold since it will result in $500 of additional income to the bakery.
D) Mango Munchie should be sold since it has the lowest cost per unit to produce.

Question 30

To think strategically about insourcing versus outsourcing, it's useful to divide processes into which of the following three categories?

A) Core processes, functional processes, and critical processes
B) Core processes, critical processes, and commodity processes
C) Critical processes, commodity processes, and functional processes.
D) Core processes, commodity processes, and functional processes.

Question 31

Processes that a company must control in-house and not outsource possibly because they are proprietary and confidential, or a source of competitive advantage are referred to as

A) functional processes.
B) critical processes.
C) core processes.
D) commodity processes.

Question 32

Payroll processes which typically can be outsourced without losing competitive advantage within a company are known as

A) core processes.
B) commodity processes.
C) critical processes.
D) functional processes.

Question 33

Pergola Industries currently produces 1,000 units of a part needed for its product, incurring the following costs: If Pergola Industries purchases the component externally, $4,000 of the fixed costs can be avoided. Below what external price per unit for the 1,000 units would Galley choose to outsource (buy) instead of insource (make)?

A) $25
B) $49
C) $53
D) $58

Question 34

Tastykakes makes various cookies and cupcakes. The cost of each batch of cupcakes and cookies is as follows: An outside supplier has offered to make the cupcakes and cookies for $30 per batch. If Tastykakes accepts the offer to outsource the production of the cupcakes and cookies, it will not be able to avoid the $14 of fixed overhead. How much will Tastykakes save if it accepts the offer?

A) $15 per batch
B) $12 per batch
C) $26 per batch
D) $ 1 per batch

Question 35

In which category of management decisions would revenues not be relevant in the decision-making process?

A) Keep versus drop decisions
B) Insource versus outsource decisions
C) Product mix decisions
D) Special orders

Question 36

A quantitative rule of thumb for a keep-versus-drop decisions is that any fixed costs avoided by dropping a product line or closing a business segment should be larger than

A) the contribution margin given up.
B) the sales given up.
C) the variable costs given up.
D) the income given up.

Question 37

Dropping a product line or a business segment that is experiencing a loss will cause the overall profitability of the company

A) to always increase.
B) to always decrease.
C) to either increase or decrease depending on the fixed costs that can be avoided compared to the contribution margin lost.
D) to either increase or decrease depending on the sales and variable costs that can be avoided compared to the contribution margin of the remaining products/segments.

Question 38

Yuwanga company has three business segments, two of which are profitable and the other which has been experiencing recurring losses. For the current year, the following information is available for the unprofitable segment: If this segment is eliminated, 70% of the fixed expenses can be eliminated and the other 30% will be allocated to the remaining segments. If management decides to eliminate this segment, the company's net income will

A) increase by $20,000.
B) decrease by $98,000.
C) decrease by $22,000.
D) increase by $22,000.

Question 39

Quentin Company is considering whether it should eliminate a product line. Currently, the company has fixed costs which are allocated to all product lines. Should Quentin Company eliminate the product line, the fixed costs currently allocated to the product line will have to be allocated to the other remaining product lines in total. If the product line is eliminated,

A) total income for the company will increase by the amount of the product line's fixed costs.
B) total income for the company will decrease by the amount of the product line's fixed costs.
C) the contribution margin of the product line will reflect the increase or decrease in the company income.
D)the company's total fixed costs will decrease.

Question 40

Saturn Industries has three product lines. Management is concerned about the Jupiter product line, which experienced an operating loss of $(40,000) last year as result of sales of $240,000, variable expenses of $150,000, and fixed expenses of $130,000. If this product line is eliminated, 60% of the fixed expenses can be eliminated, but the remaining 40% will have to be allocated to other product lines. If management decides to eliminate this product line, the company's net income will

A)increase by $40,000.
B) decrease by $90,000.
C) decrease by $12,000.
D) increase by $12,000.

Question 41

In order to maximize income within a company, management should select a sales mix with

A) more higher contribution margin per unit products/services.
B) less higher contribution margin per unit products/services.
C) more lower contribution margin per unit products/services.
D) balanced sales mix of higher and lower contribution margin per unit products/services.

Question 42

For product-mix decisions with constrained resources, companies should select the products to produce/sell based on

A) highest contribution margin per unit.
B) lowest per unit cost.
C) highest contribution margin per unit of constrained resource.
D) highest selling price per unit.

Question 43

Panera can produce and sell only one of the following bakery products: Panera has oven capacity of 1,500 hours. If Panera bakes only the most profitable product, how much will the total contribution margin be?

A) $15,000
B) $20,000
C)$22,500
D) $30,000

Question 44

Craftsman has the following production information available regarding its lawn mowers: If Craftsman currently has only 900 machine hours available per month for mower production, which of the two lawn mowers, Riding Mower and/or Self-Propelled Push Mower, should Craftsman produce to maximize net income (assuming all mowers produced can be sold)?

A) Riding Mower, since it has the highest unit contribution margin at $500.
B) Self-Propelled Push Mower, since it has the highest contribution margin per machine hour of $55.
C) Equal amounts of each mower will maximize net income for the company.
D) Not enough information is provided to compute the maximized net income computation.

Question 45

Craftsman has the following production information available regarding its lawn mowers: If Craftsman currently has sufficient production capacity (no constraints) for mower production, but can only manufacture one of the lawn mowers, which of the two lawn mowers, Riding Mower and/or Self-Propelled Push Mower, should Craftsman produce to maximize net income (assuming all mowers produced can be sold)?

A) Riding Mower, since it has the highest unit contribution margin at $500.
B) Self-Propelled Push Mower, since it has the highest contribution margin per machine hour of $55.
C) Equal amounts of each mower will maximize net income for the company.
D) Not enough information is provided to compute the maximized net income computation.

Question 46

When making special-order decisions, if there is available capacity (no additional fixed costs incurred) to complete the special order, then the criteria for the decision will be based on the comparison of

A) the unit selling prices of the existing product sales to the special-order product sales.
B) contribution margins of the existing product sales to the special-order product sales.
C) operating incomes of the existing product sales to the special-order product sales.
D) the unit production costs (variable and fixed) for the existing product sales to the special- order product sales.

Question 47

When making special order decisions, if there is not available capacity to complete the special order, and additional fixed costs need to be incurred to fulfill the special order, then the criteria for the decision will be based on the comparison of

A) the unit selling prices of the existing product sales to the special-order product sales.
B) contribution margins of the existing product sales to the special-order product sales.
C) operating incomes of the existing product sales to the special-order product sales.
D) the unit production costs (variable and fixed) for the normal product sales to the special- order product sales.

Question 48

If a company is presented with a decision to accept a special order, if it is already operating at full-capacity, and in order to accept the special order, would need to expand its capacity, which of the following will most likely to happen in the decision analysis?

A) Unit variable costs will increase.
B) Fixed costs will not be affected.
C)Both variable and fixed costs will be need to be considered.
D) The company should accept the order.

Question 49

In the decision-making process for a special order, which costs are relevant if there is sufficient production capacity (without adding production facilities)?

A) Variable costs only
B) Fixed costs only
C) Variable costs and fixed costs
D) Variable costs and avoidable costs

Question 50

Kidzlane makes child-size backpacks for a total cost of $8 per unit ($5 per unit variable cost and $3 per unit fixed cost) and a unit selling price of $12. The company has been recently contacted by a local nonprofit to make the 500 child-size backpacks for a unit selling price of $8 per unit. Kidzlane currently has available capacity to make and sell the 500 units without adding additional production capacity. What should Kidzlane do regarding the special order proposal from the local nonprofit and why?

A) Reject the special order since the special order price is equal to the total cost to make.
B) Reject the special order since the company would lose $4 per unit.
C) Accept the special order since it is being performed for a nonprofit cause, and the $4 loss can be written off as a charitable contribution.
D) Accept the special order since it will increase operating income by $1,500 or $3 per unit for 500 units.

Question 51

Kingston Company produces a hover board with a unit variable cost of $100 and a unit selling price of $176. Fixed manufacturing costs were $24,000 when 8,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $150 each. If the company has sufficient capacity to produce these additional units, should Kingston accept the special order?

A) No, because operating income will decrease by $26,000.
B) Yes, because operating income will increase by $26,000.
C) Yes, because operating income would increase by $150,000.
D) Yes, operating income will increase by $50,000.

Question 52

Khan Manufacturing incurs the following unit manufacturing cost in producing its sport earbuds: A special order for 2,000 units has been received. The unit price requested is $65. The normal unit price is $90. If the special order is accepted, the amount of contribution margin that will be realized assuming there is sufficient capacity to produce the special order.

A) $(50,000)
B) ($20,000)
C) $30,000
D) $80,000

Question 53

Brentwood Company is able to currently sell all of the units that it can produce of either A132 or B345. If Unit A132 has a unit contribution margin of $90 and it takes three machine hours to produce and Unit B345 has a unit contribution margin of $72 and takes two machine hours to produce. If Brentwood Company has a constraint on machine hours, and currently has only 1,800 machines of production time, which should Brentwood produce to maximize the operating income of the company?

A) Make Unit A132 which creates $18 more profit per unit than Unit B345 does.
B) Make Unit B345 which creates $6 more profit per machine hour than Unit A132 does.
C) Make Unit B345 because more units can be made and sold than Unit A132.
D) The same total profits exist regardless of which product is made.

Question 54

What is the determining factor when a company has sales mix with a constrained resource?

A) Contribution margin per unit of constrained resource
B) Unit contribution margin
C) Unit contribution margin times the unit of constrained resource
D) Lowest unit variable cost

Question 55

The costs and the benefits of those options not used or taken are called

A) sunk costs.
B) avoidable costs.
C) opportunity costs.
D) future costs.

Question 56

Opportunity costs

A) are recorded in the company's books only when that option is chosen.
B) are recorded in the company's books only when the option is not chosen.
C) are always recorded in the company's books.
D) are never recorded in the company's books.

Question 57

In making a decision,

A) qualitative considerations will always outweigh quantitative considerations.
B) quantitative considerations will always outweigh qualitative considerations.
C) equal weights will always be given to both qualitative and quantitative considerations.
D) the importance of qualitative and quantitative considerations can vary among alternatives and decisions.

Question 58

Opportunity costs are

A) costs and benefits of those options not used or taken
B) costs that have already occurred and cannot be changed.
C) costs that are not avoidable.
D) costs that never change from decision to decision.

Question 59

In the decision-making framework, qualitative factors are

A) never considered when making a decision.
B) considered along with the quantitative factors when making a decision.
C) only considered when making decision.
D) considered along with quantitative factors, but with much less emphasis when making a decision.

Question 60

Quantitative factors are

A) always superior to qualitative factors in the decision-making process.
B) evaluated using the same methodology in the decision-making process.
C) evaluated along with qualitative factors in the decision-making process.
D) used exclusively in the decision-making process.

Question 61

You are trying to make a decision regarding your impending holiday travel plans. You have flown into the major airport in Philadelphia in the past, but have always disliked the one-hour drive to your family's home. You have recently realized that you can fly into a local airport in Allentown, but at a somewhat higher price for the trip. You have been given the following three options for traveling home for the holidays (including all costs incurred for each option to arrive at the final total travel cost): You have narrowed your final selection down to flying into the Allentown airport, and decide on the nonstop flight to Allentown. What is the opportunity cost associated with this decision?

A) $60
B) $100
C) $140
D) $740

Question 62

You are trying to make a decision regarding your impending holiday travel plans. You have flown into the major airport in Philadelphia in the past, but have always disliked the one-hour drive to your family's home. You have recently realized that you can fly into a local airport in Allentown, but at a somewhat higher price for the trip. You have been given the following three options for traveling home for the holidays (including all costs incurred for each option to arrive at the final total travel cost): You have narrowed your final selection down to flying nonstop, and must decide between the nonstop flight to Allentown or the nonstop flight to Philadelphia. What is the opportunity cost associated with this decision if you select the nonstop flight to Allentown option?

A) $40
B) $60
C) $100
D) $740

Question 63

Which of the following is not a type of fixed cost?

A) Direct
B) Common
C) Allocated
D) Opportunity

Question 64

Fixed costs which are attributable to a product line are called

A) allocated fixed costs
B) direct fixed costs.
C) common fixed costs.
D) joint fixed costs.

Question 65

When making the decision to eliminate a business segment or product line, direct fixed costs are

A) unavoidable and relevant.
B) avoidable and nonrelevant.
C) avoidable and relevant.
D) unavoidable and nonrelevant.

Question 66

Common fixed costs

A) are differential in nature.
B) are relevant in a make-versus-buy decision.
C) are not relevant in a make-versus-buy decision.
D) only become unavoidable in a decision to keep or drop an entire outlet or location.

Question 67

Allocated fixed costs are

A) increased by corporate restructuring or layoffs.
B) only eliminated when the company goes out of business.
C) eliminated when the drops a segment or division.
D) controllable by branch or division managers.

Question 68

Which of the following fixed costs will be eliminated if a segment or product line is eliminated within a company?

A) Common fixed costs
B) Direct fixed costs
C) Allocated fixed costs
D) Home office fixed costs

Question 69

If a segment is eliminated simply because it is unprofitable, and the fixed costs associated with the eliminated segment are totally allocated fixed costs, the operating income for the company is expected to

A) decrease.
B) increase.
C) not be affected.
D) either increase or decrease depending on the contribution margin for the eliminated segment.

Question 70

Wilson Racquet Manufacturers produces three different types of tennis racquets: Control Racquet, Tweener Racquet, and a Power Racquet. Financial information for the three racquet product lines is shown below: If the fixed expenses for the Power Racquet line are not avoidable since they are allocated fixed costs, what will be total operating income be if the Power Racquet line is dropped?

A)$125,000
B) $103,000
C) $105,000
D) $140,000

Question 71

Which fixed costs are not avoidable but can be reduced by corporate restructuring or layoffs?

A) Direct fixed costs
B) Common fixed costs
C) Allocated fixed costs
D) Joint fixed costs

Question 72

Ajax company has four product lines, one of which reported the following financial results for the current year: If this product line is eliminated, 60% of the fixed expenses can be eliminated because they are direct fixed costs, and the remaining 40% of the fixed costs will be allocated to other product lines because they are allocated fixed costs. If management decides to eliminate this product line, the company's operating income is expected to

A) increase by $50,000.
B) decrease by $14,000.
C) decrease by $104,000.
D) increase by $14,000.

Question 73

Grano Cereals, Inc, has four product lines. It is very concerned about one of its product lines, which reported unprofitable for the current year as shown below: If this product line was to be dropped, 40% of the fixed expenses can be eliminated.Using the decision-making framework, how much are the relevant costs in the decision to eliminate this product line? Show all computations.

Question 74

Memorable Moments sells customizable gifts with a unit selling price per gift is $50, a unit variable cost of $27, and unit fixed cost of $13. It has recently been approached by a local high school with a request to make a custom graduation picture frame for each of the 1,200 students in the current graduating class at a price of $30 per frame. Memorable Moments management is very concerned that by accepting this special order, it may impact the profitability of the company but would like to be socially responsible to the local community. Using the decision-making framework, what are the total relevant costs and total relevant revenues in this management decision scenario? Show all computations.

Question 75

Power Industries is considering two alternatives: Solar and Wind. The Solar option will generate relevant revenues of $200,000 and relevant costs of $140,000. The Wind option is expected to generate relevant revenues of $180,000 and relevant costs of $90,000. Applying the decision-making framework, which option should Power Industries select? Show all computations.

Question 76

Tuffin Trinkets Company can sell any mix of Trinket A and Trinket B at full capacity. The company has 80,000 hours of capacity. The demand for each product exceeds the current operating capacity. The following information is​ available for the trinkets: If production capacity is the constraining factor, which trinket should be produced to maximize operating income and why?

Question 77

Ember Industries incurs a unit cost of $20 (unit variable cost of $14 and unit fixed cost of $6) to produce the electronic lighting switch in its outdoor propane fire pits. A supplier has offered to make 10,000 of the parts at a price per unit of $15. If this offer is accepted by Ember Industries, it will save all variable costs but no fixed costs. Should Ember Industries outsource its production for this part or should it continue to insource the production? Show all computations.

Question 78

Flameco, Inc. incurs a unit cost of $20 (unit variable cost of $16 and unit fixed cost of $4) to produce the electronic lighting switch in its outdoor propane fire pits. A supplier has offered to make 10,000 of the parts at a price per unit of $15. If this offer is accepted by Flameco, Inc., it will save all variable costs but no fixed costs. Should Flameco, Inc. outsource its production for this part or should it continue to insource the production? Show all computations.

Question 79

The steps in the management decision-making framework are shown in random order below. Indicate the correct order
a. Calculate relevant costs and benefits for each option.
b. Implement your decision.
c. Clearly outline the problem and its related unknowns.
d. Select the option that maximizes the benefit to the organization and meets required qualitative criteria.
e. Identify suitable options and gather relevant qualitative and quantitative information, making informed assumptions as need be.

Question 80

Poppy's Plantery has been selling an average of 750 plants per week over the past two months of this year. Poppy's sells each plant for $3. Each plant is grown in Poppy's own greenhouse, has a unit variable cost of $0.75, and Poppy's weekly fixed costs are $900. Poppy's Plantery is considered buying plants grown by another supplier which have been offered at a price of $1.00 per plant. If Poppy's were to purchase the plants instead of growing them in-house, half of the fixed costs can be avoided. Should Poppy's Plantery continue to grow its own plants or purchase them directly from a supplier. Show all computations.