Question : 11.2   Identify the differences among relevant costs for short-term and : 1185988

11.2   Identify the differences among relevant costs for short-term and long-term production output decisions.

1) All fixed costs are irrelevant in relevant-cost analysis.

2) All variable costs are relevant in relevant-cost analysis.

3) Insourcing is the process of producing goods and services within the firm rather than purchasing them from an outside supplier.

4) An example of an outsourcing process is when a computer company purchases keyboards from another company instead of producing the components internally.

5) For one-time-only special orders, variable costs may be relevant but not fixed costs.

6) Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

7) Which of the following terms represents additional costs required to obtain an additional quantity, over and above existing or planned quantities of a cost object?

A) contract increase costs

B) contract pocket costs

C) contract expense

D) outlay costs

E) super variable costs

8) A one-time-only special order decision

A) should consider only long-term costs and benefits.

B) must still consider short-term and long-term costs and benefits.

C) allows a company to sell products at prices which only cover fixed costs.

D) should consider only short-term costs and benefits.

E) should only be undertaken if there is idle capacity.

9) Comics Plus has a current production level of 200,000 comics per month. Unit costs at this level are:

Direct materials

$0.125

Direct labour

0.200

Variable overhead

0.075

Fixed overhead

0.100

Marketing – Fixed

0.100

Marketing/distribution – Variable

0.200

Current monthly sales are 180,000 units. Printers Ltd. has contacted Comics Plus about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order, and variable marketing/ distributing costs would not be incurred on the special order.

What is Comics Plus’ change in profits if the order is accepted?

A) $6,000 increase

B) $6,000 decrease

C) $7,500 increase

D) $9,000 increase

E) $3,000 increase

10) Northern Glass Manufacturing has a current production level of 200,000 glass jars per month. Unit costs at this level are:

Direct materials

$0.345

Direct labour

0.400

Variable overhead

0.175

Fixed overhead

0.100

Marketing – Fixed

0.100

Marketing/distribution – Variable

0.200

Current monthly sales are 180,000 units. Canadian Hardware Ltd. has contacted Northern Glass Manufacturing about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order, and variable marketing/ distributing costs would not be incurred on the special order.

What is Comics Plus’ change in profits if the order is accepted?

A) $4,800 increase

B) $4,800 decrease

C) $1,800 decrease

D) $300 decrease

E) $1,200 increase