Question : 12.2   Evaluate existing information to decide a competitive price for : 1186002

 

12.2   Evaluate existing information to decide on a competitive price for a special order.

 

1) Special orders increase income if the revenue from the order exceeds the incremental variable and fixed costs incurred to fill the order.

 

2) In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered irrelevant data.

 

3) A price-bidding decision for a one-time-only special order includes an analysis of

A) only marketing costs.

B) all cost drivers.

C) all costs of each function in the value chain.

D) only fixed manufacturing costs.

E) indirect costs of each category in the value chain.

 

4) Decisions on the price to bid on a one-time-only special order should include

A) only cost data.

B) only the potential bids of competitors.

C) existing fixed manufacturing overhead.

D) cost data, and the use of variable costing income statements.

E) cost data and potential bids of competitors.

5) Your company produces 700,000 widgets per year but has the capacity to produce 950,000 units. Company records show the following; full product costs = $85 per unit, which includes fixed manufacturing overhead of $11, and variable overhead of $4 per unit, and direct variable costs of $22, all based on the current 700,000 production run. If the company wanted to bid on a special one-time order, based on the above information only, what would be its minimum bid?

A) $59

B) $81

C) $63

D) $74

E) $85

 

Use the information below to answer the following question(s).

 

Action Mopeds manufactures mopeds. The following information pertains to the company’s normal operations per month:

 

Output units

15,000 mopeds

Machine-hours

4,000 hours

Direct manufacturing labour hours

5,000 hours

Direct manufacturing labour per hour

$24

Direct materials per unit

$200

Variable manufacturing overhead costs

$322,500

Fixed costs:

 

Fixed manufacturing overhead costs

$1,200,000

Marketing and distribution costs

$1,125,000

Research and development costs

$900,000

 

6) What is the unit cost for establishing a minimum bid on a one-time-only special order of 1,000 mopeds from an overseas city if all cost relationships remain the same except for a one-time setup charge of $40,000?

A) $269.50

B) $309.50

C) $444.50

D) $260.50

E) $209.50

7) What is the unit cost when establishing a long-run price for mopeds?

A) $309.50

B) $325.48

C) $444.50

D) $460.50

E) $470.00

 

Answer the following question(s) using the information below.

 

Rogers’ Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers’ Heaters has excess capacity. The following per unit data apply for sales to regular customers:

 

Direct materials

$200

Direct manufacturing labour

60

Variable manufacturing support

30

Fixed manufacturing support

100

       Total manufacturing costs

390

Markup (30%)

117

Estimated selling price

$507

 

8) For Rogers’ Heaters, what is the minimum acceptable price of this one-time-only special order?

A) $290

B) $390

C) $260

D) $507

E) $377

9) If Ms. Yukki wanted a long-term commitment for supplying this product, what price would most likely be quoted to her?

A) $290

B) $390

C) $260

D) $377

E) $507

 

Answer the following question(s) using the information below.

 

Gerry’s Generator Supply is approached by Mr. Gladstone, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Gerry’s Generator Supply has excess capacity. The following per unit data apply for sales to regular customers:

 

Direct materials

$850

Direct manufacturing labour

50

Variable manufacturing support

100

Fixed manufacturing support

    75

       Total manufacturing costs

1,075

Markup (20%)

   215

Estimated selling price

$1,290

 

10) For Gerry’s Generators, what is the minimum acceptable price of this one-time-only special order?

A) $900

B) $1,000

C) $1,075

D) $1,290

E) $1,200