Acctg for Decision Making

1021 WordsOct 28, 20115 Pages
RELEVANT INFORMATION & DECISION MAKING 1. Which of the following best defines the concept of a relevant cost? A. A past cost that is the same among alternatives. B. A past cost that differs among alternatives. C. A future cost that is the same among alternatives. D. A future cost that differs among alternatives. E. A cost that is based on past experience. 2. Susan is contemplating a job offer with an advertising agency where she will make $54,000 in her first year of employment. Alternatively, Susan can begin to work in her father 's business where she will earn an annual salary of $38,000. If Susan decides to work with her father, the opportunity cost would be: A. $0. B. $38,000. C. $54,000. D. $92,000. E. irrelevant in…show more content…
Sales: Clothing: $850,000 - ($850,000 [pic] 15%) = $722,500 Accessories: $150,000 + $70,000 = $220,000 Total sales: $722,500 + $220,000 = $942,500 Variable costs: Clothing: $510,000 [pic] $850,000 = 60%; $722,500 [pic] 60% = $433,500 Accessories: $82,500 + [$70,000 [pic] (1 - 35%)] = $128,000 Total variable costs: $433,500 + $128,000 = $561,500 Fixed and remodeling costs: $290,000 + ($70,000 - $45,000) + $42,000 + $16,000 = $373,000 Operating income: $942,500 - $561,500 - $373,000 = $8,000 7. Fowler Industries produces two bearings: C15 and C19. Data regarding these two bearings follow. [pic] The company requires 8,000 units of C15 and 11,000 units of C19. Recently, management decided to devote additional machine time to other product lines, resulting in only 31,000 machine hours per year that can be dedicated to production of the bearings. An outside company has offered to sell Fowler the bearings at prices of $13.50 for C15 and $13.50 for C19. Required: A. Assume that Fowler decided to produce all C15s and purchase C19s only as needed. Determine the number of C19s to be purchased. B. Compute the net benefit to the company of manufacturing (rather than purchasing) a unit of C15. Repeat the calculation for a unit of C19. C. Fowler lacks sufficient machine time to produce all of the C15s and C19s needed. Which component (C15 or C19) should Fowler manufacture first with the
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