MA 4 medio aperto

Contribution margin is the difference between total sales revenue and total variable costs. It helps in making decisions regarding whether to retain or drop a segment by providing insight into the profitability of the segment and its contribution towards covering fixed costs and generating operating profit.

Allocated fixed costs can distort the decision-making process as they may not accurately reflect the segment's profitability. This can lead to incorrect conclusions about whether to keep or drop a segment.

Sourcing decisions involve evaluating core activities and cost considerations to choose between internal production and external procurement. Factors such as economies of scale, control over essential activities, and financial implications influence this decision-making process.

<p>Advantages of vertical integration include potential economies of scale, while disadvantages include the potential loss of control over essential activities.</p> Signup and view all the answers

<p>The decision should consider the financial advantage, allocation of fixed costs, volume assumption, and the impact on the company's overall net operating income.</p> Signup and view all the answers

<p>A comprehensive framework considers various factors such as fixed costs, volume assumptions, and overall impact on the company's net operating income, providing a more holistic view of the decision.</p> Signup and view all the answers

<p>The potential financial advantage of making a part internally is calculated by subtracting the cost of buying the part from an external supplier from the cost of making it internally. For example, if the cost of buying is $25 and the cost of making is $30, the financial advantage is $30 - $25 = $5.</p> Signup and view all the answers

<p>Sunk costs are costs that have already been incurred and cannot be recovered. In decision-making, sunk costs are always irrelevant when choosing among alternatives because they cannot be changed or avoided. Only future costs and benefits that differ between alternatives should be considered.</p> Signup and view all the answers

<p>The total machine time for SureStart is 400,000 batteries * 36 minutes = 14,400,000 minutes. The total machine time for LongLife is 400,000 batteries * 48 minutes = 19,200,000 minutes. Therefore, the total machine time required for the batteries is 14,400,000 + 19,200,000 = 33,600,000 minutes.</p> Signup and view all the answers

<p>Identifying relevant costs and benefits is crucial in decision-making because it allows decision-makers to focus on the costs and benefits that will differ between the alternatives being considered. This helps in making informed choices and maximizing the potential benefits.</p> Signup and view all the answers

<p>Opportunity costs refer to the benefits that are foregone when one alternative is chosen over another. These costs need to be considered when making decisions to ensure that the best alternative is selected, taking into account all potential benefits.</p> Signup and view all the answers

<p>The total cost approach considers all costs incurred in a given situation, regardless of whether they are relevant to the decision at hand. On the other hand, the differential cost approach focuses only on the costs and benefits that differ between the alternatives being considered.</p> Signup and view all the answers

<p>In Cynthia's decision to drive or take the train, relevant costs would include the cost of gas, parking fees, and train tickets. These costs are relevant because they differ between the two alternatives and can impact her decision-making process.</p> Signup and view all the answers

<p>Differential analysis is the process of identifying and analyzing the differences in costs and benefits between two or more alternatives. It focuses on the changes in costs and revenues that result from choosing one alternative over another, guiding decision-makers in selecting the most favorable option.</p> Signup and view all the answers

<p>The total indirect factory wages are $6,000,000.00 and the factory equipment depreciation is $3,500,000.00.</p> Signup and view all the answers

<p>The percentage of factory equipment depreciation consumed by customer orders is 20%.</p> Signup and view all the answers

<p>Baxter Bakery had 10,000 customer orders for the activity cost pool of indirect factory wages.</p> Signup and view all the answers

<p>Baxter Bakery had 4,000 design changes for the activity cost pool of factory equipment depreciation.</p> Signup and view all the answers

<p>The total activity level for machine-hours at Baxter Bakery is 800,000.</p> Signup and view all the answers

<p>Baxter Bakery served 2,000 customers for the activity cost pool of organization-sustaining costs.</p> Signup and view all the answers

<p>The individual activity rates can be computed by dividing the total cost for each activity by the total activity levels.</p> Signup and view all the answers

<p>Opportunity cost is the benefit that is foregone as a result of pursuing some course of action. An example from the text is the opportunity cost of using a space to make Part 4A, which 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. 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 Inc. should accept the special order. The incremental revenue will exceed the incremental costs, resulting in a net operating income increase of $6,000, as calculated: $30,000 (increase in revenue) - $24,000 (increase in costs) = $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 is said to have a constraint. The machine or process that is limiting overall output is called the bottleneck. Companies should select the product mix that maximizes the company’s total contribution margin, 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

<p>Ensign Company should focus its efforts on Product 2. Since Machine A1 is the constrained resource and is being used at 100% of its capacity, focusing on Product 2, which requires less machine time, will allow for better utilization of the constrained resource.</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>A sunk cost is a cost that has already been incurred and cannot be recovered. In decision-making, sunk costs are irrelevant because they do not affect future costs and revenues. The cost incurred to buy the equipment is a sunk cost in the given context.</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 because it does not change based on the decision to make or buy part 4A.</p> Signup and view all the answers