MA 4 facile aperto

The three activity cost pools at Baxter Bakery are indirect factory wages, factory equipment depreciation, and organization-sustaining costs. The percentage of resource consumption for each pool is as follows: indirect factory wages - 30%, factory equipment depreciation - 20%, and organization-sustaining costs - not assigned to products or customers.

The total activity levels for each activity cost pool at Baxter Bakery are: 10,000 customer orders, 4,000 design changes, 800,000 machine-hours, and 2,000 customers served.

The individual activity rates for each activity cost pool at Baxter Bakery can be computed by dividing the total cost for each activity by the total activity levels.

<p>The two products at Baxter Bakery are SureStart and LongLife. SureStart requires no new design resources and has 800,000 batteries ordered with 4,000 separate orders. LongLife requires new design resources.</p> Signup and view all the answers

<p>The total cost for the indirect factory wages at Baxter Bakery is $6,000,000.00.</p> Signup and view all the answers

<p>The total cost for the factory equipment depreciation at Baxter Bakery is $3,500,000.00.</p> Signup and view all the answers

<p>The total organization-sustaining costs at Baxter Bakery are not assigned to products or customers.</p> Signup and view all the answers

<p>The contribution margin approach is used to decide whether to retain or drop a segment.</p> Signup and view all the answers

<p>The contribution margin approach is necessary to identify relevant fixed costs for decision-making.</p> Signup and view all the answers

<p>Dropping the digital watch segment would result in a $40,000 operating profit loss for the company.</p> Signup and view all the answers

<p>Allocated fixed costs can distort the decision to keep or drop a segment, as they may not accurately reflect the segment's profitability.</p> Signup and view all the answers

<p>Sourcing decisions involve choosing between internal production and external procurement, based on core activities and cost considerations.</p> Signup and view all the answers

<p>Vertical integration involves making decisions about carrying out activities internally or buying externally from suppliers. Advantages include potential economies of scale, while disadvantages include loss of control over essential activities.</p> Signup and view all the answers

<p>The decision to make or buy the part should consider the financial advantage of making the part internally, which is $160,000.</p> Signup and view all the answers

<p>Sunk costs are costs that have already been incurred and cannot be recovered. They are always irrelevant when choosing among alternatives because they cannot be changed by any current or future decision.</p> Signup and view all the answers

<p>The key to effective decision-making is extit{differential analysis}, which involves comparing the relevant costs and benefits of different alternatives.</p> Signup and view all the answers

<p>Opportunity costs need to be considered when making decisions, as they represent the value of the next best alternative foregone.</p> Signup and view all the answers

<p>The total cost approach considers all costs associated with an alternative, while the differential cost approach focuses on the costs and benefits that differ between alternatives.</p> Signup and view all the answers

<p>Decision-making involves choosing from at least two alternatives and identifying the relevant costs and benefits associated with each alternative.</p> Signup and view all the answers

<p>SureStart requires 36 minutes of machine time for a total of 480,000 machine-hours, while LongLife requires 48 minutes of machine time for a total of 320,000 machine-hours.</p> Signup and view all the answers

<p>400,000 batteries were ordered with 6,000 separate orders.</p> Signup and view all the answers

<p>The avoidable costs associated with making part 4A include direct materials, direct labor, variable overhead, and the supervisor’s salary.</p> Signup and view all the answers

<p>The cost incurred to buy the equipment is a sunk cost; the depreciation simply spreads this sunk cost over the equipment’s useful life.</p> Signup and view all the answers

<p>The allocated general factory overhead represents allocated costs common to all items produced in the factory and would continue unchanged. Thus, it is irrelevant to the decision.</p> Signup and view all the answers

<p>Opportunity costs are the benefits that are foregone as a result of pursuing some course of action. They are not actual cash outlays and are not recorded in the formal accounts of an organization. If the space to make Part 4A had an alternative use, the opportunity cost would have been equal to the segment margin that could have been derived from the best alternative use of the space.</p> Signup and view all the answers

<p>A special order is a one-time order that is not considered part of the company’s normal ongoing business.</p> Signup and view all the answers

<p>When analyzing a special order, only the incremental costs and benefits are relevant. The existing fixed manufacturing overhead costs would not be affected by the order, so they are not relevant.</p> Signup and view all the answers

<p>Yes, Jet should accept the special order, as the incremental revenue will exceed the incremental costs, resulting in a net operating income increase of $6,000.</p> Signup and view all the answers

<p>Volume trade-off decisions occur when companies do not have enough capacity to produce all of the products and sales volumes demanded by their customers. In these situations, companies must trade off or sacrifice production of some products in favor of others in an effort to maximize profits.</p> Signup and view all the answers

<p>When a limited resource restricts the company’s ability to satisfy demand, the company should select the product mix that maximizes the total contribution margin. This means promoting those products or accepting those orders that provide the highest contribution margin in relation to the constraining resource.</p> Signup and view all the answers