Question :
21) When deciding to accept a one-time-only special order from : 1216922
21) When deciding to accept a one-time-only special order from a wholesaler, management should do all of the following EXCEPT:
A) analyze product costs
B) consider the special order’s impact on future prices of their products
C) determine whether excess capacity is available
D) verify past design costs for the product
22) When there is excess capacity, it makes sense to accept a one-time-only special order for less than the current selling price when:
A) incremental revenues exceed incremental costs
B) additional fixed costs must be incurred to accommodate the order
C) the company placing the order is in the same market segment as your current customers
D) it never makes sense
23) Full cost of the product is:
A) the sum of fixed costs in all the business functions of the value chain
B) the sum of variable costs in all the business functions of the value chain
C) the sum of all variable and fixed costs in all the business functions of the value chain
D) the sum of all costs in the value chain minus marketing costs
Answer the following questions using the information below:
Kolar 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. Kolar Manufacturing has excess capacity. The following per unit data apply for sales to regular customers:
Variable costs:
Direct materials$80
Direct labor40
Manufacturing support70
Marketing costs30
Fixed costs:
Manufacturing support90
Marketing costs30
Total costs340
Markup (50%)170
Targeted selling price$510
24) What is the full cost of the product per unit?
A) $220
B) $340
C) $510
D) $170
25) What is the contribution margin per unit?
A) $170
B) $220
C) $290
D) $510
26) For Kolar Manufacturing, what is the minimum acceptable price of this special order?
A) $220
B) $290
C) $340
D) $510
27) What is the change in operating profits if the one-time-only special order for 1,000 units is accepted for $360 a unit by Kolar?
A) $140,000 increase in operating profits
B) $20,000 increase in operating profits
C) $20,000 decrease in operating profits
D) $150,000 decrease in operating profits
28) Ratzlaff Company has a current production level of 20,000 units per month. Unit costs at this level are:
Direct materials$0.25
Direct labor0.40
Variable overhead0.15
Fixed overhead0.20
Marketing – fixed0.20
Marketing/distribution – variable0.40
Current monthly sales are 18,000 units. Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company’s change in operating profits if the special order is accepted?
A) $400 increase in operating profits
B) $400 decrease in operating profits
C) $1,800 increase in operating profits
D) $1,800 decrease in operating profits
29) Snapper Tool Company has a production capacity of 3,000 units per month, but current production is only 2,500 units. Total manufacturing costs are $60 per unit and marketing costs are $16 per unit. Doug Levy offers to purchase 500 units at $76 each for the next five months. Should Snapper accept the one-time-only special order if only absorption-costing data are available?
A) Yes, good customer relations are essential.
B) No, the company will only break even.
C) No, since only the employees will benefit.
D) Yes, since operating profits will most likely increase.
Answer the following questions using the information below:
Heck’s Kitchens is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
Direct materials$455
Direct labor300
Variable manufacturing support45
Fixed manufacturing support100
Total manufacturing costs900
Markup (60%)540
Targeted selling price$1,440
Heck’s Kitchens has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $50 per unit.
30) For Heck’s Kitchens, what is the minimum acceptable price of this one-time-only special order?
A) $850
B) $950
C) $805
D) $1,460
