Question :
65) Qualitative factors important in the decision-making process even though : 1211758
65) Qualitative factors are important in the decision-making process even though they cannot be measured numerically.
66) In a one-time special order situation, if the price offered by the buyer is less than the absorption cost per unit, the special order may still be profitable since absorption costs include allocated fixed manufacturing overhead.
67) In relevant-cost analysis, managers should not consider all variable as relevant and all fixed costs as irrelevant.
68) An incremental product cost is generally a fixed cost.
69) If Option 1 costs $120 and Option 2 costs $90, then the differential cost is $30.
70) Variable cost per unit is the best product cost to use for one-time-only special order decisions.
71) Fluty Corporation manufactures a product that has two parts, A and B. It is currently considering two alternative proposals related to these parts.
The first proposal is for buying Part A. This would free up some of the plant space for the manufacture of more of Part B and assembly of the final product. The product vice president believes the additional production of the final product can be sold at the current market price. No other changes in manufacturing would be needed.
The second proposal is for buying new equipment for the production of Part B. The new equipment requires fewer workers and uses less power to operate. The old equipment has a net disposal value of zero.
Required:
Tell whether the following items are relevant or irrelevant for each proposal. Treat each proposal independently.
a.Total variable manufacturing overhead, Part A
b.Total variable manufacturing overhead, Part B
c.Cost of old equipment for manufacturing Part B
d.Cost of new equipment for manufacturing Part B
e.Total variable selling and administrative costs
f.Sales revenue of the product
g.Total variable costs of assembling final products
h.Total direct manufacturing materials, Part A
i.Total direct manufacturing materials, Part B
j.Total direct manufacturing labor, Part A
k.Total direct manufacturing labor, Part B
72) Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:
Direct materials$1,782
Direct labor810
Variable manufacturing support1,296
Fixed manufacturing support2,808
Total manufacturing costs6,696
Markup (50%)3,348
Targeted selling price$ 10,044
Parker and Spitzer Manufacturing has excess capacity.
Required:
a.What is the full cost of the product per unit if the marketing costs is $3,000?
b.What is the contribution margin per unit?
c.Which costs are relevant for making the decision regarding this one-time-only special order? Why?
d.For Parker and Spitzer Manufacturing, what is the minimum acceptable price of this one-time-only special order?
e.For this one-time-only special order, should Parker and Spitzer Manufacturing consider a price of $5,400 per unit? Why or why not?
