Fuller Company makes frames.A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each.Normally, Fuller would charge $90 per frame for this type of order.Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup.The set-up charge costs are 100% labor.Currently, the workers needed to set up for and make the frames are working at Fuller.Their wages will be paid whether or not the special order is accepted.Fuller's policy is to avoid layoffs to the extent possible.
-Which costs of the special order relate to flexible resources?
A) wood and glass
B) wood, glass, and variable overhead
C) depreciation on machinery
D) wood, glass, and direct labor
E) wood, glass, direct labor, and setup labor

Question

Fuller Company makes frames.A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each.Normally, Fuller would charge $90 per frame for this type of order.Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup.The set-up charge costs are 100% labor.Currently, the workers needed to set up for and make the frames are working at Fuller.Their wages will be paid whether or not the special order is accepted.Fuller's policy is to avoid layoffs to the extent possible. 
-Which costs of the special order relate to flexible resources?
A) wood and glass
B) wood, glass, and variable overhead
C) depreciation on machinery
D) wood, glass, and direct labor
E) wood, glass, direct labor, and setup labor

Quizplus · Accepted Answer

Flexible resources are those that can be adjusted or controlled in the short term. In this case, the cost of wood, glass, and variable overhead can be considered flexible resources. The direct labor cost is also somewhat flexible since the workers are already on the payroll and would be paid regardless of whether or not the special order is accepted. However, the setup labor cost and depreciation on machinery are fixed costs and cannot be adjusted in the short term. Therefore, choices C and E are incorrect. Choice A only includes the cost of materials, but not the variable overhead which is also a flexible resource. Thus, the best choice is B which includes all applicable flexible resource costs.

Fuller Company Makes Frames