1. Depreciation expense on existing factory equipment is usually irrelevant in a decision of whether to accept or reject a special offer for a company's product.
True False
2. When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.
True False
3. One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers.
True False
4. Defective units should be detected and scrapped or reworked before the bottleneck operation rather than after it.
True False
5. In a factory operating at capacity, not every machine and person should be working at the maximum possible rate.
True False
6. Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks.
True False
7. The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers.
True False
8. Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.
True False
9. The term joint cost is used to describe the costs incurred after the split-off point in a process involving joint products.
True False
10. Joint products are products that are sold to customers as a set or as part of a group of products.
True False
11 When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on:
A. selling price per unit
B. contribution margin per unit
C. contribution margin per unit of the constraining resource
D. unit sales volume
12. Yehle Inc. regularly uses material Y51B and currently has in stock 460 liters of the material for which it paid $2,530 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $4.55 per liter. New stocks of the material can be purchased on the open market for $5.45 per liter, but it must be purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 720 liters of the material to be used in a job for a customer. The relevant cost of the 720 liters of material Y51B is:
A. $3,924
B. $5,450
C. $3,510
D. $3,276
13. Roddey Corporation is a specialty component manufacturer with idle capacity. Management would like to use its extra capacity to generate additional profits. A potential customer has offered to buy 2,900 units of component GEE. Each unit of GEE requires 3 units of material R39 and 8 units of material I59. Data concerning these two materials follow:
|
Material
|
Units in Stock
|
Original Cost Per Unit
|
Current Market Price Per Unit
|
Disposal Value Per Unit
|
|
R39
|
340
|
$4.70
|
$4.35
|
$3.95
|
|
I59
|
23,700
|
$8.20
|
$8.05
|
$6.85
|
Material R39 is in use in many of the company's products and is routinely replenished. Material I59 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up.
What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product GEE?
A. $224,605
B. $196,765
C. $228,204
D. $193,285.