Questions and Answers
What is the percentage of indirect factory wages consumed by customer orders at Baxter Battery?
How many customer orders are there for each activity cost pool at Baxter Battery?
What are the total activity levels for machine-hours at Baxter Battery?
What is the total number of customers served at Baxter Battery?
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What is the total cost for indirect factory wages at Baxter Battery?
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What is the total cost for factory equipment depreciation consumed by customer orders at Baxter Battery?
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How many design changes are there for each activity cost pool at Baxter Battery?
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In decision-making, which costs are always irrelevant when choosing among alternatives?
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What is the total machine-hours required for SureStart batteries?
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What is the total machine-hours required for LongLife batteries?
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What is the total number of separate orders for the 400,000 batteries?
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What is the total number of custom designs prepared?
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What is the key to effective decision-making according to the text?
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When making decisions, what needs to be considered according to the text?
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When analyzing a special order, which costs and benefits are relevant?
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What is the opportunity cost if the space to make Part 4A had an alternative use?
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In volume trade-off decisions, what should a company do to maximize profits?
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What is the constrained resource in the context of Ensign Company's production?
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What is the financial advantage of accepting the special order for Jet Inc.?
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What represents allocated costs common to all items produced in the factory and is irrelevant to the decision of making or buying part 4A?
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What is the key factor to consider when making volume trade-off decisions?
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What should a company do to maximize total contribution margin in relation to the constraining resource?
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What should Ensign Company focus its efforts on, considering Machine A1 is the constrained resource?
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When making sourcing decisions, what is an advantage of vertical integration?
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What is the primary reason for considering the financial advantage of making a part internally?
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What should the decision to make or buy a part consider, in addition to the cost comparison?
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What can distort the decision to keep or drop a segment when considering allocated fixed costs?
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What is the key factor to consider when deciding whether to retain or drop a segment using a contribution margin approach?
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What is involved in sourcing decisions, based on core activities and cost considerations?
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What is an example of a relevant cost in the decision to make or buy a part?
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What is the primary purpose of using a contribution margin approach in deciding whether to retain or drop a segment?
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What factor can distort the decision to keep or drop a segment?
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What is an advantage of vertical integration in decision-making?
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What should be considered when making a decision to make or buy a part internally?
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What should the decision to make or buy a part internally involve, besides the cost comparison?
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What does the unit product cost for a part include?
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What is the potential impact of dropping the digital watch segment for the company?
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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.