Financial Accounting > EXAM > ACC 350 TEST 5 REVIEW (Questions & Answers) (All)

ACC 350 TEST 5 REVIEW (Questions & Answers)

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Constraint Target full product cost Differential analysis Relevant cost Price setter Target pricing Irrelevant cost Sunk cost Relevant information Cost plus pricing Price taker Opportunity cost Joint cost When companies are price-setters, their products and services If a business is considering whether to replace old equipment with newer equipment, the cost of operating the old equipment, compared to the cost of operating the new equipment, is relevant to the business decision. When making decisions, managers should consider Paragon Products sells a special type of navigation equipment for $ 1400. Variable costs are $800 per unit. When a special order arrived from a foreign contractor to buy 44 units at a reduced sales price of $1,000 per unit, there was a discussion among the managers. The controller said that as long as the special price was greater than the variable costs, the sale would contribute to the company's profits and should be accepted as offered. The vice president, however, decided to decline the order. Which of the following statements supports the decision of the vice president? Lightning Semiconductors produces 400,000 hi-tech computer chips per month. Each chip uses a component that Lightning makes in-house. The variable costs to make the component are $1.30 per unit, and the fixed costs are $1,300,000 per month. The company has been approached by a foreign producer who can supply the component, within acceptable quality standards, for $1.20 each. The fixed costs are unavoidable, and Lightning would have no other use for the facilities currently employed in making the component. What would be the effect on operating income if the company decides to outsource? Which of the following is relevant to Kitchenware.com's decision to accept a special order at a lower sale price from a large customer in China? Marlow Company makes bulk quantities of cleaning fluids. They currently sell 1,400 containers a month at a sales price of $25 per unit. If they add a new scent, they could charge $30 per unit for the improved product. It would cost them a total of $1,000 per month to make that alteration. If they decide to process further, it will improve their operating income. When considering whether to replace the building roof, the total amount paid for previous roof repairs is relevant to the business decision. When making outsourcing decisions, which of the following is true? Managers must consider three questions when setting regular prices: Special pricing Allocated fixed costs Relevant fixed costs include: DECISION RULE: Which product to emphasize? OUTSOURCING: decision rule

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