Quiz 10: Relevant Information for Decision Making

Information that is related to past events is relevant in the decision-making process.

Information that has a bearing on future events is relevant in the decision-making process.

In evaluating alternative courses of action,a manager should select the alternative that provides the highest incremental benefit to the company.

The outsourcing decision is also referred to as a "make-or-buy" decision.

A company may outsource some of its production in order to focus on core competencies.

In an outsourcing decision,unavoidable fixed costs are irrelevant.

In an outsourcing decision,avoidable fixed costs are irrelevant.

In an outsourcing decision,variable costs of production are relevant.

In an outsourcing decision,rent received from an outside party for facility use is a relevant cash inflow.

When multiple products are produced and sold,a change in the sales price of one product may cause a change in the sales mix of the firm.

In setting compensation structures,fixed salary expense is normally not considered.

In a special order decision,unavoidable current fixed costs are taken into consideration in setting a sales price.

In a special order decision,the sales price should be sufficient to cover a job's variable costs,incremental fixed costs,and generate a profit.

The Robinson-Patman Act prohibits companies from pricing products at different levels when there are no significant differences in production costs.

When making a decision to discontinue an operating segment,allocated common costs are not considered.

When making a decision to discontinue an operating segment,avoidable fixed costs are not considered.

Segment margin measures a segment's contribution to the coverage of indirect expenses.

Depreciation on factory equipment is normally a relevant cost in product line decisions.

The amount of revenue that differs across decision choices is referred to as ______________________________.

The amount of cost that differs across decision choices is referred to as _________________________.

The benefits foregone when one course of action is chosen over another are referred to as ______________________________.

Costs incurred in the past to acquire an asset are referred to as _________________________.

When a company has work performed by an external supplier,it is engaging in ____________________.

The relative product quantities composing a company's total sales is referred to as a company's _________________________.

The excess of revenues over direct variable expenses and avoidable fixed expenses is referred to as ______________________________.

Costs forgone when an individual or organization chooses one option over another are A)budgeted costs. B)sunk costs. C)historical costs. D)opportunity costs.

Which of the following costs would not be accounted for in a company's recordkeeping system? A)an unexpired cost B)an expired cost C)a product cost D)an opportunity cost

Which of the following is not a characteristic of relevant costing information? It is A)associated with the decision under consideration. B)significant to the decision maker. C)readily determined from financial records. D)related to a future endeavor.

A fixed cost is relevant if it is A)uncontrollable. B)avoidable. C)sunk. D)a product cost.

Relevant costs are A)all fixed and variable costs. B)all costs that would be incurred within the relevant range of production. C)past costs that are expected to be different in the future. D)anticipated future costs that will differ among various alternatives.

Which of the following is the least likely to be a relevant item in deciding whether to replace an old machine? A)acquisition cost of the old machine B)outlay to be made for the new machine C)annual savings to be enjoyed on the new machine D)life of the new machine

If a cost is irrelevant to a decision,the cost could not be A)a sunk cost. B)a future cost. C)a variable cost. D)an incremental cost.

Which of the following costs would be relevant in short-term decision making? A)incremental fixed costs B)all costs of inventory C)total variable costs that are the same in the considered alternatives D)the cost of a fixed asset that could be used in all the considered alternatives

The term incremental cost refers to A)the profit foregone by selecting one choice instead of another. B)the additional cost of producing or selling another product or service. C)a cost that continues to be incurred in the absence of activity. D)a cost common to all choices in question and not clearly or feasibly allocable to any of them.

A cost is sunk if it A)is not an incremental cost. B)is unavoidable. C)has already been incurred. D)is irrelevant to the decision at hanD.

Most ____ are relevant to decisions to acquire capacity,but not to short-run decisions involving the use of that capacity. A)sunk costs B)incremental costs C)fixed costs D)prime costs

Irrelevant costs generally include A)yes yes no B)yes no no C)no no yes D)yes yes yes

In deciding whether an organization will keep an old machine or purchase a new machine,a manager would ignore the A)estimated disposal value of the old machine. B)acquisition cost of the old machine. C)operating costs of the new machine. D)estimated disposal value of the new machine.

The potential rental value of space used for production activities A)is a variable cost of production. B)represents an opportunity cost of production. C)is an unavoidable cost. D)is a sunk cost of production.

The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is A)the total manufacturing cost of the component. B)the total variable cost of the component. C)the fixed manufacturing cost of the component. D)zero.

Which of the following are relevant in a make or buy decision? A)no yes yes B)yes no yes C)no no yes D)yes yes no

In a make or buy decision,the opportunity cost of capacity could A)be considered to decrease the price of units purchased from suppliers. B)be considered to decrease the cost of units manufactured by the company. C)be considered to increase the price of units purchased from suppliers. D)not be considered since opportunity costs are not part of the accounting records.

Which of the following are relevant in a make or buy decision? A)yes yes yes B)yes no yes C)yes no no D)no no yes

In a make or buy decision,the reliability of a potential supplier is A)an irrelevant decision factor. B)relevant information if it can be quantified. C)an opportunity cost of continued production. D)a qualitative decision factor.

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part? A)maintaining a long-term relationship with suppliers B)quality control is critical C)utilization of idle capacity D)part is critical to product

When a scarce resource,such as space,exists in an organization,the criterion that should be used to determine production is A)contribution margin per unit. B)selling price per unit. C)contribution margin per unit of scarce resource. D)total variable costs of production.

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called A)target costing. B)insourcing. C)outsourcing. D)product harvesting.

Which of the following activities within an organization would be least likely to be outsourced? A)accounting B)data processing C)transportation D)product design

An outside firm selected to provide services to an organization is called a A)contract vendor. B)lessee. C)network organization. D)centralized insourcer.

Fixed costs are ignored in allocating scarce resources because A)they are sunk. B)they are unaffected by the allocation of scarce resources. C)there are no fixed costs associated with scarce resources. D)fixed costs only apply to long-run decisions.

The minimum selling price that should be acceptable in a special order situation is equal to total A)production cost. B)variable production cost. C)variable costs and avoidable fixed costs. D)production cost plus a normal profit margin.

Which of the following costs is irrelevant in making a decision about a special order price if some of the company facilities are currently idle? A)direct labor B)equipment depreciation C)variable cost of utilities D)opportunity cost of production

The ____ prohibits companies from pricing products at different amounts unless these differences reflect differences in the cost to manufacture,sell,or distribute the products. A)Internal Revenue Service B)Governmental Accounting Office C)Sherman Antitrust Act D)Robinson-Patman Act

An ad hoc sales discount is A)an allowance for an inferior quality of marketed goods. B)a discount that an ad hoc committee must decide on. C)brought about by competitive pressures. D)none of the above.

A manager is attempting to determine whether a segment of the business should be eliminated.The focus of attention for this decision should be on A)the net income shown on the segment's income statement. B)sales minus total expenses of the segment. C)sales minus total direct expenses of the segment. D)sales minus total variable expenses and avoidable fixed expenses of the segment.

Assume a company produces three products: A,B,and C.It can only sell up to 3,000 units of each product.Production capacity is unlimited.The company should produce the product (or products)that has (have)the highest A)contribution margin per hour of machine time. B)gross margin per unit. C)contribution margin per unit. D)sales price per unit.

For a particular product in high demand,a company decreases the sales price and increases the sales commission.These changes will not increase A)sales volume. B)total selling expenses for the product. C)the product contribution margin. D)the total variable cost per unit.

An increase in direct fixed costs could reduce all of the following except A)product line contribution margin. B)product line segment margin. C)product line operating income. D)corporate net income.

When a company discontinues a segment,total corporate costs may decrease in all of the following categories except A)variable production costs. B)allocated common costs. C)direct fixed costs. D)variable period costs.

In evaluating the profitability of a specific organizational segment,all ____ would be ignored. A)segment variable costs B)segment fixed costs C)costs allocated to the segment D)period costs

Eichholtz Company uses 10,000 units of a part in its production process.The costs to make a part are: direct material,$12;direct labor,$25;variable overhead,$13;and applied fixed overhead,$30.Eichholtz has received a quote of $55 from a potential supplier for this part.If Eichholtz buys the part,70 percent of the applied fixed overhead would continue.Eichholtz Company would be better off by A)$50,000 to manufacture the part. B)$150,000 to buy the part. C)$40,000 to buy the part. D)$160,000 to manufacture the part.

Collins Company uses 12,000 units of a part in its production process.The costs to make a part are: direct material,$15;direct labor,$27;variable overhead,$15;and applied fixed overhead,$32.Eichholtz has received a quote of $60 from a potential supplier for this part.If Collins buys the part,75 percent of the applied fixed overhead would continue.Collins Company would be better off by A)$30,000 to manufacture the part. B)$348,000 to buy the part. C)$60,000 to buy the part. D)$216,000 to manufacture the part.

Lewis Company has only 25,000 hours of machine time each month to manufacture its two products.Product X has a contribution margin of $50,and Product Y has a contribution margin of $64.Product X requires 5 hours of machine time,and Product Y requires 8 hours of machine time.If Lewis Company wants to dedicate 80 percent of its machine time to the product that will provide the most income,the company will have a total contribution margin of A)$250,000. B)$240,000. C)$210,000. D)$200,000.

Marshall Company has only 30,000 hours of machine time each month to manufacture its two products.Product X has a contribution margin of $60,and Product Y has a contribution margin of $72.Product X requires 6 hours of machine time,and Product Y requires 10 hours of machine time.If Marshall Company wants to dedicate 85 percent of its machine time to the product that will provide the most income,the company will have a total contribution margin of A)$216,000 B)$228,600. C)$287,400 D)$300,000

Phillips Company has 3 divisions: X,Y,and Z.Division X's income statement shows the following for the year ended December 31: Cost of goods sold is 75 percent variable and 25 percent fixed.Of the fixed costs,60 percent are avoidable if the division is closed.All of the selling expenses relate to the division and would be eliminated if Division X were eliminated.Of the administrative expenses,90 percent are applied from corporate costs.If Division X were eliminated,Phillips's income would A)increase by $150,000. B)decrease by $ 75,000. C)decrease by $155,000. D)decrease by $215,000.

Engel Company has 3 divisions: A,B,and C.Division A's income statement shows the following for the year ended December 31: Cost of goods sold is 80 percent variable and 20 percent fixed.Of the fixed costs,50 percent are avoidable if the division is closed.All of the selling expenses relate to the division and would be eliminated if Division A were eliminated.Of the administrative expenses,85 percent are applied from corporate costs.If Division A were eliminated,Engel's income would A)increase by $100,000. B)decrease by $197,500. C)decrease by $310,000. D)decrease by $422,500.

Buxton Company is currently operating at a loss of $15,000.The sales manager has received a special order for 5,000 units of product,which normally sells for $35 per unit.Costs associated with the product are: direct material,$6;direct labor,$10;variable overhead,$3;applied fixed overhead,$4;and variable selling expenses,$2.The special order would allow the use of a slightly lower grade of direct material,thereby lowering the price per unit by $1.50 and selling expenses would be decreased by $1.If Buxton wants this special order to increase the total net income for the firm to $10,000,what sales price must be quoted for each of the 5,000 units? A)$23.50 B)$24.50 C)$27.50 D)$34.00

Gallagher Company produces a part that has the following costs per unit: Homeland Corporation can provide the part to Gallagher for $19 per unit.Gallagher Company has determined that 60 percent of its fixed overhead would continue if it purchased the part.However,if Gallagher no longer produces the part,it can rent that portion of the plant facilities for $60,000 per year.Gallagher Company currently produces 10,000 parts per year.Which alternative is preferable and by what margin? A)Make-$20,000 B)Make-$50,000 C)Buy-$10,000 D)Buy-$40,000

Glover Company produces a part that has the following costs per unit: London Corporation can provide the part to Glover for $23 per unit.Glover Company has determined that 50 percent of its fixed overhead would continue if it purchased the part.However,if Glover no longer produces the part,it can rent that portion of the plant facilities for $70,000 per year.Glover Company currently produces 12,000 parts per year.Which alternative is preferable and by what margin? A)Make-$24,000 B)Make-$60,000 C)Buy-$10,000 D)Buy-$46,000

Graham Company has 15,000 units in inventory that had a production cost of $3 per unit.These units cannot be sold through normal channels due to a significant technology change.These units could be reworked at a total cost of $23,000 and sold for $28,000.Another alternative is to sell the units to a junk dealer for $8,500.The relevant cost for Graham to consider in making its decision is A)$45,000 of original product costs. B)$23,000 for reworking the units. C)$68,000 for reworking the units. D)$28,000 for selling the units to the junk dealer.

Kelly Company has 20,000 units in inventory that had a production cost of $4 per unit.These units cannot be sold through normal channels due to a significant technology change.These units could be reworked at a total cost of $30,000 and sold for $35,000.Another alternative is to sell the units to a junk dealer for $10,500.The relevant cost for Kelly to consider in making its decision is A)$80,000 of original product costs. B)$30,000 for reworking the units. C)$110,000 for reworking the units. D)$35,000 for selling the units to the junk dealer.

Athmer Corporation Athmer Corporation sells a product for $18 per unit,and the standard cost card for the product shows the following costs: Refer to Athmer Corporation.Athmer received a special order for 1,000 units of the product.The only additional cost to Athmer would be foreign import taxes of $1 per unit.If Athmer is able to sell all of the current production domestically,what would be the minimum sales price that Athmer would consider for this special order? A)$18.00 B)$11.00 C)$5.40 D)$19.00

Athmer Corporation Athmer Corporation sells a product for $18 per unit,and the standard cost card for the product shows the following costs: Refer to Athmer Corporation.Assume that Athmer has sufficient idle capacity to produce the 1,000 units.If Athmer wants to increase its operating profit by $5,600,what would it charge as a per-unit selling price? A)$18.00 B)$10.00 C)$11.00 D)$16.60

McCoy Corporation McCoy Corporation sells a product for $21 per unit,and the standard cost card for the product shows the following costs: Refer to McCoy Corporation.McCoy received a special order for 1,200 units of the product.The only additional cost to McCoy would be foreign import taxes of $2 per unit.If McCoy is able to sell all of the current production domestically,what would be the minimum sales price that McCoy would consider for this special order? A)$10.00 B)$15.00 C)$21.00 D)$23.00

McCoy Corporation McCoy Corporation sells a product for $21 per unit,and the standard cost card for the product shows the following costs: Refer to McCoy Corporation.Assume that McCoy has sufficient idle capacity to produce the 1,200 units.If McCoy wants to increase its operating profit by $6,000,what would it charge as a per-unit selling price? A)$15.00 B)$17.00 C)$21.00 D)$23.00

Beauty Tools Corporation makes and sells brushes and combs.It can sell all of either product it can make.The following data are pertinent to each respective product: Total fixed overhead is $380,000. The company has 40,000 machine hours available for production.What sales mix will maximize profits? A)320,000 brushes and 0 combs B)0 brushes and 800,000 combs C)160,000 brushes and 600,000 combs D)252,630 brushes and 252,630 combs

Denver Boot Corporation has been asked to submit a bid on supplying 1,000 pairs of military combat boots to the Armed Forces Training Center.The company's costs per pair of boots are as follows: Assuming that there would be no commission on this potential sale,the lowest price the firm can bid is some price greater than A)$23. B)$20. C)$17. D)$14.

Wightman Industries has two sales territories-East and West.Financial information for the two territories is presented below: Because the company is in a start-up stage,corporate management feels that the East sales territory is creating too much of a cash drain on the company and it should be eliminated.If the East territory is discontinued,one sales manager (whose salary is $40,000 per year)will be relocated to the West territory.By how much would Wightman's income change if the East territory is eliminated? A)increase by $88,000 B)increase by $48,000 C)decrease by $267,000 D)decrease by $227,000

Savannah Motors Savannah Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Savannah Motors.The $4,000 of annual operating costs that are common to both the old and the new machine are an example of a(n) A)sunk cost. B)irrelevant cost. C)future avoidable cost. D)opportunity cost.

Savannah Motors Savannah Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Savannah Motors.The $20,000 cost of the new machine represents a(n) A)sunk cost. B)future relevant cost. C)future irrelevant cost. D)opportunity cost.

Savannah Motors Savannah Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Savannah Motors.The estimated $500 salvage value of the existing machine in 10 years represents a(n) A)sunk cost. B)opportunity cost of selling the existing machine now. C)opportunity cost of keeping the existing machine for 10 years. D)opportunity cost of keeping the existing machine and buying the new machine.

Savannah Motors Savannah Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Savannah Motors.The incremental cost to purchase the new machine is A)$11,000 B)$13,000. C)$18,000. D)$20,000.

Boston Bakers Boston Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Boston Bakers.The $5,000 of annual operating costs that are common to both the old and the new machine are an example of a(n) A)sunk cost. B)irrelevant cost. C)future avoidable cost. D)opportunity cost.

Boston Bakers Boston Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Boston Bakers.The $10,000 cost of the original machine represents a(n) A)sunk cost. B)future relevant cost. C)historical relevant cost. D)opportunity cost.

Boston Bakers Boston Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Boston Bakers.The estimated $650 salvage value of the existing machine in 10 years represents a(n) A)sunk cost. B)opportunity cost of selling the existing machine now. C)opportunity cost of keeping the existing machine for 10 years. D)opportunity cost of keeping the existing machine and buying the new machine.

Boston Bakers Boston Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows: Refer to Boston Bakers.The incremental cost to purchase the new machine is A)$15,000. B)$17,500. C)$22,500. D)$25,000.

Ultralinear Electronics Corporation Ultralinear Electronics Corporation manufactures and sells FM radios.Information on the prior year's operations (sales and production Model A1)is presented below: Refer to Ultralinear Electronics Corporation.The Model B2 radio is currently in production and it renders the Model A1 radio obsolete.If the remaining 500 units of the Model A1 radio are to be sold through regular channels,what is the minimum price the company would accept for the radios? A)$30 B)$27 C)$18 D)$4

Ultralinear Electronics Corporation Ultralinear Electronics Corporation manufactures and sells FM radios.Information on the prior year's operations (sales and production Model A1)is presented below: Refer to Ultralinear Electronics Corporation.Assume that the remaining Model A1 radios can be sold through normal channels or to a foreign buyer for $6 per unit.If sold through regular channels,the minimum acceptable price will be A)$30. B)$33. C)$10. D)$4.

Southern Digital,Inc. The Southern Digital,Inc.produces a high-quality computer chip.Unit production costs (based on capacity production of 100,000 units per year)follow: Refer to Southern Digital,Inc.Assume,for this question only,that the Memory Division is producing and selling at capacity.What is the minimum selling price that the division would consider on a "special order" of 1,000 chips on which no variable period costs would be incurred? A)$100 B)$72 C)$81 D)$94

Southern Digital,Inc. The Southern Digital,Inc.produces a high-quality computer chip.Unit production costs (based on capacity production of 100,000 units per year)follow: Refer to Southern Digital,Inc.Assume,for this question only,that the Memory Division is operating at a level of 70,000 chips per year.What is the minimum price that the division would consider on a "special order" of 1,000 chips to be distributed through normal channels? A)$78 B)$95 C)$100 D)$81

Southern Digital,Inc. The Southern Digital,Inc.produces a high-quality computer chip.Unit production costs (based on capacity production of 100,000 units per year)follow: Refer to Southern Digital,Inc.Assume,for this question only,that the Memory Division is presently operating at a level of 80,000 chips per year.Accepting a "special order" on 2,000 chips at $88 will A)increase total corporate profits by $4,000. B)increase total corporate profits by $20,000. C)decrease total corporate profits by $14,000. D)decrease total corporate profits by $24,000.

Brazosport Pipe Corporation The capital budgeting committee of the Brazosport Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model.Information on the existing machine and the new model follows: Refer to Brazosport Pipe Corporation.The major opportunity cost associated with the continued use of the existing machine is A)$30,000 of annual savings in operating costs. B)$20,000 of salvage in 5 years on the new machine. C)lost sales resulting from the inefficient existing machine. D)$400,000 cost of the new machine.

Brazosport Pipe Corporation The capital budgeting committee of the Brazosport Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model.Information on the existing machine and the new model follows: Refer to Brazosport Pipe Corporation.The $80,000 market value of the existing machine is A)a sunk cost. B)an opportunity cost of selling the old machine. C)irrelevant to the equipment replacement decision. D)a historical cost.

Brazosport Pipe Corporation The capital budgeting committee of the Brazosport Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model.Information on the existing machine and the new model follows: Refer to Brazosport Pipe Corporation.If the company buys the new machine and disposes of the existing machine,corporate profit over the five-year life of the new machine will be ____ than the profit that would have been generated had the existing machine been retained for five years. A)$150,000 lower B)$170,000 lower C)$230,000 lower D)$150,000 higher

Seminole Corporation has been manufacturing 5,000 units of Part 10541,which is used in the manufacture of one of its products.At this level of production,the cost per unit of manufacturing Part 10541 is as follows: Luther Company has offered to sell Seminole 5,000 units of Part 10541 for $19 a unit.Seminole has determined that it could use the facilities currently used to manufacture Part 10541 to manufacture Part RAC and generate an operating profit of $4,000.Seminole has also determined that two-thirds of the fixed overhead applied will continue even if Part 10541 is purchased from Luther.To determine whether to accept Luther's offer,the net relevant costs to make are A)$70,000. B)$84,000. C)$90,000. D)$95,000.

Birmingham Corporation manufactures batons.Birmingham can manufacture 300,000 batons a year at a variable cost of $750,000 and a fixed cost of $450,000.Based on Birmingham's predictions,240,000 batons will be sold at the regular price of $5.00 each.In addition,a special order was placed for 60,000 batons to be sold at a 40 percent discount off the regular price.The unit relevant cost per unit for Birmingham's decision is A)$1.50. B)$2.50. C)$3.00. D)$4.00.

What is an opportunity cost and why is it a relevant cost?

What are three characteristics of relevant information?

Why are fixed costs generally more relevant in long-run decisions than short-run decisions?

Why is depreciation expense irrelevant to most managerial decisions,even when it is a future cost?

Define and discuss outsourcing.

What is the relationship between scarce resources and an organization's production capacity?

What are some factors that a company must consider when deciding to raise or lower sales prices on products?

Under what circumstances is the sum of variable production and selling costs the appropriate minimum price for special orders?

Define segment margin and explain why it is a relevant measure of a segment's contribution to overall organizational profitability.

Wholesome Wheat Corporation Wholesome Wheat Corporation grows grain in rural areas of the South.The corporation's costs per bushel of grain (based on an average yield of 130 bushels per acre)follow: Wholesome Wheat Corporation defines direct material costs as seed,fertilizer,water,and other chemicals.The variable overhead costs represent maintenance and repair costs of machinery.The fixed overhead costs are completely comprised of depreciation expense on machinery and real estate taxes. Refer to Wholesome Wheat Corporation.Assume that the current date is March 15.On this date,the corporation must make a decision as to whether it is financially better off to plant a certain farm with grain or leave the land idle (no income is derived from idle land).Grain prices have been severely depressed in recent years and Wholesome Wheat's best guess is that grain prices will be around $2.00 per bushel at the time the crop is ready for harvest.Should the company plant grain or leave the land idle? Explain.

Wholesome Wheat Corporation Wholesome Wheat Corporation grows grain in rural areas of the South.The corporation's costs per bushel of grain (based on an average yield of 130 bushels per acre)follow: Wholesome Wheat Corporation defines direct material costs as seed,fertilizer,water,and other chemicals.The variable overhead costs represent maintenance and repair costs of machinery.The fixed overhead costs are completely comprised of depreciation expense on machinery and real estate taxes. Refer to Wholesome Wheat Corporation.Assume for this question only that the company decided to plant the grain.A local oil refiner has approached the company about converting the crop to grain alcohol (used to make gasohol)rather than selling the grain to the local grain elevator.If Wholesome Wheat converts the grain to alcohol,it will incur additional costs of $0.60 per bushel,and the company will be able to sell the crop to the oil refiner for the equivalent of $2.60 per bushel.Otherwise,the company can sell the grain crop to the local grain elevator for $1.85 per bushel.If Wholesome Wheat elects to sell the grain to the refinery,the company will not incur the variable selling costs.What should the company do? Support your answer with calculations.

Wholesome Wheat Corporation Wholesome Wheat Corporation grows grain in rural areas of the South.The corporation's costs per bushel of grain (based on an average yield of 130 bushels per acre)follow: Wholesome Wheat Corporation defines direct material costs as seed,fertilizer,water,and other chemicals.The variable overhead costs represent maintenance and repair costs of machinery.The fixed overhead costs are completely comprised of depreciation expense on machinery and real estate taxes. Refer to Wholesome Wheat Corporation.Assume that the current date is March 15.On this date,Wholesome Wheat Corporation must make a decision as to whether it is financially better off to plant a certain farm to grain,leave the land idle (no income is derived from idle land),or rent the land to another farmer for $50 per acre.Grain prices have been severely depressed in recent years and Wholesome Wheat Corporation's best guess is that grain prices will be around $2.00 per bushel at the time the crop is ready for harvest.What should the company do? Show calculations.

Albuquerque Corporation makes and sells the "Desert Icon",a wall hanging depicting a magical cactus plant.The Desert Icons are sold at specialty shops for $50 each.The capacity of the plant is 15,000 Icons.Costs to manufacture and sell each wall hanging are as follows:

Terrell and Associates,CPA's provides two types of services: audit and tax.All company personnel can perform either service.In efforts to market its services,the company relies on radio and billboards for advertising.Information on the company's projected operations for the coming year follows:

The management of Freeman Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier.A $100 cost per component was determined as follows:

Goodall Corporation is working at full production capacity producing 10,000 units of a unique product,RST.Manufacturing costs per unit for RST follow:

The Hanks Company normally produces 150,000 units of Product AB per year.Due to an economic downturn,the company has some idle capacity.Product AB sells for $15 per unit. The firm's production,marketing,and administration costs at its normal capacity are: