MA 4 difficile chiuso

Questions and Answers

What is the percentage of indirect factory wages consumed by customer orders at Baxter Battery?

20%

35%

25%

30% (correct)

How many customer orders are there for each activity cost pool at Baxter Battery?

15,000 customer orders

5,000 customer orders

10,000 customer orders (correct)

8,000 customer orders

What are the total activity levels for machine-hours at Baxter Battery?

600,000 machine-hours

400,000 machine-hours

800,000 machine-hours (correct)

1,000,000 machine-hours

What is the total number of customers served at Baxter Battery?

2,000 customers served Signup and view all the answers

What is the total cost for indirect factory wages at Baxter Battery?

$6,000,000.00 Signup and view all the answers

What is the total cost for factory equipment depreciation consumed by customer orders at Baxter Battery?

$700,000.00 Signup and view all the answers

How many design changes are there for each activity cost pool at Baxter Battery?

4,000 design changes Signup and view all the answers

In decision-making, which costs are always irrelevant when choosing among alternatives?

Sunk costs Signup and view all the answers

What is the total machine-hours required for SureStart batteries?

$28,800,000$ Signup and view all the answers

What is the total machine-hours required for LongLife batteries?

$1,920,000$ Signup and view all the answers

What is the total number of separate orders for the 400,000 batteries?

6,000 Signup and view all the answers

What is the total number of custom designs prepared?

4,000 Signup and view all the answers

What is the key to effective decision-making according to the text?

Differential analysis Signup and view all the answers

When making decisions, what needs to be considered according to the text?

Opportunity costs Signup and view all the answers

When analyzing a special order, which costs and benefits are relevant?

Only the incremental costs and benefits Signup and view all the answers

What is the opportunity cost if the space to make Part 4A had an alternative use?

Equal to the segment margin that could have been derived from the best alternative use of the space Signup and view all the answers

In volume trade-off decisions, what should a company do to maximize profits?

Select the product mix that maximizes the company’s total contribution margin Signup and view all the answers

What is the constrained resource in the context of Ensign Company's production?

Machine A1 Signup and view all the answers

What is the financial advantage of accepting the special order for Jet Inc.?

$6,000.00 Signup and view all the answers

What represents allocated costs common to all items produced in the factory and is irrelevant to the decision of making or buying part 4A?

Allocated general factory overhead Signup and view all the answers

What is the key factor to consider when making volume trade-off decisions?

Constraint Signup and view all the answers

What should a company do to maximize total contribution margin in relation to the constraining resource?

Promote those products or accept those orders that provide the highest contribution margin in relation to the constraining resource Signup and view all the answers

What should Ensign Company focus its efforts on, considering Machine A1 is the constrained resource?

Product 1 Signup and view all the answers

When making sourcing decisions, what is an advantage of vertical integration?

Potential economies of scale Signup and view all the answers

What is the primary reason for considering the financial advantage of making a part internally?

To assess the impact on the company's overall net operating income Signup and view all the answers

What should the decision to make or buy a part consider, in addition to the cost comparison?

Allocation of fixed costs and volume assumption Signup and view all the answers

What can distort the decision to keep or drop a segment when considering allocated fixed costs?

They may not accurately reflect the segment's profitability Signup and view all the answers

What is the key factor to consider when deciding whether to retain or drop a segment using a contribution margin approach?

Relevant fixed costs Signup and view all the answers

What is involved in sourcing decisions, based on core activities and cost considerations?

Choosing between internal production and external procurement Signup and view all the answers

What is an example of a relevant cost in the decision to make or buy a part?

The financial advantage of making the part internally Signup and view all the answers

What is the primary purpose of using a contribution margin approach in deciding whether to retain or drop a segment?

To identify the relevant fixed costs for decision-making Signup and view all the answers

What factor can distort the decision to keep or drop a segment?

Allocated fixed costs Signup and view all the answers

What is an advantage of vertical integration in decision-making?

Potential economies of scale Signup and view all the answers

What should be considered when making a decision to make or buy a part internally?

Financial advantage of making the part internally Signup and view all the answers

What should the decision to make or buy a part internally involve, besides the cost comparison?

A comprehensive framework Signup and view all the answers

What does the unit product cost for a part include?

Direct materials, direct labor, variable overhead, depreciation, supervisor's salary, and general factory overhead Signup and view all the answers

What is the potential impact of dropping the digital watch segment for the company?

$40,000 operating profit loss Signup and view all the answers

Study Notes

Managerial Accounting and Decision Making

A contribution margin approach is used to decide whether to retain or drop the digital watch segment.
The contribution margin approach is necessary to identify relevant fixed costs for decision-making.
Dropping the digital watch segment would result in a $40,000 operating profit loss for the company.
Allocated fixed costs can distort the decision to keep or drop a segment, as they may not accurately reflect the segment's profitability.
Sourcing decisions involve choosing between internal production and external procurement, based on core activities and cost considerations.
Vertical integration involves making decisions about carrying out activities internally or buying externally from suppliers.
Advantages of vertical integration include potential economies of scale, while disadvantages include loss of control over essential activities.
An example of a sourcing decision is presented, involving the choice between making a part internally or buying it from an external supplier.
The unit product cost for the part includes direct materials, direct labor, variable overhead, depreciation, supervisor's salary, and general factory overhead.
The decision to make or buy the part should consider the financial advantage of making the part internally, which is $160,000.
The decision should not be based solely on the cost comparison ($25 from the supplier versus $30 internally), but should involve a comprehensive framework.
The decision should consider the allocation of fixed costs, the volume assumption, and the impact on the company's overall net operating income.

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Description

Test your understanding of key concepts in decision-making and managerial accounting with this quiz. Explore topics such as differential analysis, relevant costs and benefits, contribution margin approach, sourcing decisions, and the make-or-buy decision. Sharpen your knowledge of decision-making processes and their impact on a company's profitability.