Question: Premier Company manufactures gear model G37, which

> What qualitative considerations are relevant in a make-or-buy decision?

> Provide an example of a fixed cost that would be relevant to a make-or-buy decision, and an example of a fixed cost that would not be relevant to such a decision.

> What is a cost center?

> Are fixed costs always irrelevant?

> What behavioral factors may influence some managers to consider sunk costs as being relevant in their decisions?

> Why should decision makers focus only on the relevant costs for decision making?

> What does the term incremental cost mean?

> How do step variable costs differ from fixed costs?

> Santos Company is considering introducing a new compact disc player model at a price of $105 per unit. Santos’s controller has compiled the following incremental cost information based on an estimate of 120,000 units of sales annually for the new product

> Walt’s Woodwork Company makes and sells wooden shelves. Walt’s carpenters make the shelves in the company’s rented building. Walt has a separate office at another location that also includes a showroom where customers can view sample shelves and ask ques

> Spencer Grant, a financial planner, contacts and meets with local individuals to assist with financial planning and investments in Spencer’s employer’s investment services company. Spencer receives no fee for financial

> Xu Company makes two types of wood doors: standard and deluxe. The doors are manufactured in a plant consisting of three departments: cutting, assembly, and finishing. Both labor and machine time are spent on the two products as they are worked on in eac

> Hudson Hydronics, Inc., is a corporation based in Troy, New York, that sells high-quality hydronic control devices. It manufactures two products, HCD1 and HCD2, for which the following information is available: The average wage rate including fringe ben

> What is a responsibility center?

> Excel Corporation manufactures three products at its plant. The plant capacity is limited to 120,000 machine hours per year on a single-shift basis. Direct material and direct labor costs are variable. The following data are available for planning purpos

> Perform an Internet or electronic library search on “close underperforming departments,” “unprofitable products,” or a similar phrase to locate an example of a company that has closed unprofitable stores or dropped unprofitable products or services. Desc

> Merchant Company manufactures and sells three models of electronic printers. Ken Gail, president of the company, is considering dropping model JT484 from its product line because the company has experienced losses for this product during the past three q

> Hollenberry, Inc., is a successful mail-order catalog business with customers worldwide. The company’s headquarters is in a small town some distance from any major metropolitan area. Sales have grown steadily over the years, and the call center facilitie

> Beau’s Bistro has a reputation for providing good value for its menu prices. The desserts, developed by the pastry chef, are one of the distinctive features of the menu. The pastry chef has just given notice that he will relocate to another city in a mon

> Syd Young, the production manager at Fuchow Company, purchased a cutting machine for the company last year. Six months after the purchase of the cutting machine, Syd learned about a new cutting machine that is more reliable than the machine that he purch

> Genis Battery Company is considering accepting a special order for 50,000 batteries that it received from a discount retail store. The order specified a price of $4 per unit, which reflects a discount of $0.50 per unit relative to the companyâ&#128

> Anderson Department Stores is considering the replacement of the existing elevator system at its downtown store. A new system has been proposed that runs faster than the existing system, experiences few breakdowns, and as a result promises considerable s

> Wedmark Corporation’s Cupertino, California, plant manufactures chips used in personal computers. Its practical capacity is 2,000 chips per week, and fixed costs are $75,000 per week. The selling price is $500 per chip. Production this quarter is 1,600 c

> Dawson Company produces and sells 80,000 boxes of specialty foods each year. Each box contains the same assortment of food. The company has computed the following annual costs: Dawson normally charges $25 per box. A new distributor has offered to purcha

> What does control mean in a decentralized organization?

> Capilano Containers Company specializes in making high-quality customized containers to order. Its agreement with the labor union ensures employment for all its employees and a fixed payroll of $80,000 per month, including fringe benefits. This payroll m

> Last month, Capetini Capacitor Company sold capacitors to its distributors for $250 per capacitor. The sales level of 3,000 capacitors per month was less than the single-shift capacity of 4,400 capacitors at its plant located in San Diego. Variable produ

> Johnson Company and Smith Company are competing firms that offer limousine service from the Charlesburg airport. While Johnson pays most of its employees on a per-ride basis, Smith prefers to pay its employees fixed salaries. Information about the sellin

> Shannon O’Reilly is trying to decide whether to continue to take public transportation to work or to purchase a car. Before making her decision, she would like to compare the cost of using public transportation and the cost of driving a car. Required (a

> Classify each of the following as a variable or fixed cost with respect to a unit of production: a. Salaries of production supervisors. b. Steel used in automobile production. c. Wood used in furniture production. d. Salaries for factory custodial staff.

> Berry Company produces and sells 30,000 cases of fruit preserves each year. The following information reflects a breakdown of its costs: Berry marks up its prices 40% over full costs. It has surplus capacity to produce 15,000 more cases. A French superm

> Gilmark Company has 10,000 obsolete lamps carried in inventory at a cost of $12 each. They can be sold as they are for $4 each. They can be reworked, however, at a total cost of $55,000 and sold for $10 each. Required Determine whether it is worthwhile

> Florida Favorites Company produces toy alligators and toy dolphins. Fixed costs are $1,290,000 per year. Sales revenue and variable costs per unit are as follow: Required (a) Suppose the company currently sells 140,000 alligators per year and 60,000 dol

> A&Z Company sells products both domestically and internationally. Fixed costs totaled $5,000,000 last year. In an effort to increase its total sales volume, A&Z plans to spend an additional $1,280,000 in advertising next year. Expected average pr

> What is decentralization?

> Last year, Able Co. recorded sales revenues of $1,260,000, variable costs of $570,000, and fixed costs of $480,500. Required (a) At what sales dollar level will Able earn a before-tax target profit of $250,000? (b) At what sales dollar level will Able b

> Patterson Parkas Company’s sales revenue is $30 per unit, variable costs are $19.50 per unit, and fixed costs are $147,000. Required (a) Compute Patterson’s contribution margin per unit and contribution margin ratio. (b) Determine the number of units Pa

> Morton Medical Institute operates a 300-bed hospital and offers a number of specialized medical services. Morton’s hospital facility and equipment are leased on a long-term basis. The hospital charges $2,000 per patient day. On the basis of past cost dat

> Klear Camera Company is considering introducing a new video camera. Its selling price is projected to be $1,000 per unit. Variable manufacturing costs are estimated to be $500 per unit. Variable selling costs are 10% of sales dollars. The company expects

> Percy’s is a small hamburger shop catering mainly to students at a nearby university. It sells hamburgers and vegetarian burgers and is open for business from 11:00 A.M. until 11:00 P.M., Monday through Friday. The owner, Percy Luk, employs two cooks, on

> Classify each of the following as a variable or fixed cost with respect to a unit of product that is sold: a. Commissions paid to sales personnel. b. Advertising expenses. c. Salaries of staff processing orders. d. Salary of the chief executive officer.

> Boyd Wood Company makes a regular and a deluxe grade of wood floors. Regular grade is sold at $16 per square yard, and the deluxe grade is sold at $25 per square yard. The variable cost of making the regular grade is $10 per square yard. It costs an extr

> Superstore is a large discount supermarket. Profits have declined, so the manager has collected data on revenues and costs for different food categories. The following data pertain to some of the frozen foods that Superstore sells. To facilitate comparis

> The manufacturing capacity of Ritter Rotator Company’s plant facility is 60,000 rotators per quarter. Operating results for the first quarter of this year are as follows. Sales (36,000 units at $10) $360,000 Variable manufacturing and selling costs

> Shorewood Shoes Company makes and sells a variety of leather shoes for children. For its current mix of different models and sizes, the average selling price and costs per pair of shoes are as follows: Shoes are manufactured in batch sizes of 100 pairs.

> How does productivity (the ratio of sales to investment) affect return on investment?

> McGee Corporation’s Olympia plant produces a module used in automobile manufacturing. The company’s practical capacity is 4,000 modules per week. The selling price is $900 per module. Production this quarter is 3,000 modules per week, and all of the modu

> George’s Grill analyzes profitability of three operating units: restaurant, bar, and billiards room. Revenues, variable costs, and attributable fixed costs (which can be avoided if the unit is eliminated) for each unit are as follows:

> Fab Motors has manufactured compressor parts at its plant in Pitcairn, Indiana, for the past 25 years. An outside supplier, Superior Compressor Company, has offered to supply compressor model C38 at a price of $200 per unit. Current unit manufacturing co

> Kane Company is considering outsourcing a key component. A reliable supplier has quoted a price of $64.50 per unit. The following costs of the component when manufactured in-house are expressed on a per unit basis: Direct materials……………………$23.40 Direct l

> The assembly division of Davenport, Inc., is bidding on an order of 50,000 smart phones. The division is eager to get this order because it has a substantial amount of unused plant capacity. The variable cost for each smart phone is $140 in addition to t

> Joyce Printers, Inc., is considering replacing its current printing machines with newer, faster, and more efficient printing technology. The following data have been compiled: The existing machines can be disposed of now for $40,000. Keeping them will c

> McKinnon Company’s plant manager is considering buying a new grinding machine to replace an old grinding machine or overhauling the old one to ensure compliance with the plant’s high-quality standards. The following da

> Don Baxter’s 6-year-old Impala requires repairs estimated at $5,400 to make it roadworthy again. His friend Aaron Bloom suggested that he buy a 6-year-old Ford Escort instead for $5,400 cash. Aaron estimated the following costs for the

> Healthy Hearth specializes in lunches for health-conscious people. The company produces a small selection of lunch offerings each day. The menu selections may vary from day to day, but Healthy Hearth charges the same price per menu selection because it a

> How does efficiency (the ratio of income to sales) affect return on investment?

> What is the assigned responsibility in a revenue center?

> Joel purchased 100 shares of stock for $20 per share. During the year, he received dividend checks amounting to $150. Joel recently sold the stock for $32 per share. What was Joel’s return on the stock?

> Jenna purchased a 5-acre parcel of land for $28,000 and sold it two years later for $41,000. What was her return on that investment?

> Peter is married and has two children. He wants to be sure that he has sufficient life insurance to take care of his family if he dies. Peter’s wife is a homemaker but attends college part-time pursuing a law degree. It will cost approximately $40,000 fo

> Shortly after Steve graduated from college, he considered a whole life insurance policy that would provide $10,000 in life insurance protection and accumulate a cash value of twice his current annual income by age 65. Two years later, after Steve’s marri

> Bart is a college student. Because his plan is to get a job immediately after graduation, he determines that he will need about $250,000 in life insurance to provide for his future wife and children (Bart is not married yet and does not have any children

> Considering the information in the previous problem, how much life insurance should they purchase for Mary?

> Marty and Mary have jobs and contribute to the household expenses according to their income. Marty contributes 75% of the expenses, and Mary contributes 25%. Currently, their household expenses are $30,000 annually. Marty and Mary have three children. Th

> Brad tells you about his plans to upgrade his auto insurance. Specifically, he would like to add several types of coverage to his policy, such as uninsured motorist coverage and rental car coverage. Recall that Brad is 30 years old. He also has a driving

> Brad tells you about his plans to upgrade his auto insurance. Specifically, he would like to add several types of coverage to his policy, such as uninsured motorist coverage and rental car coverage. Recall that Brad is 30 years old. He also has a driving

> Brad tells you about his plans to upgrade his auto insurance. Specifically, he would like to add several types of coverage to his policy, such as uninsured motorist coverage and rental car coverage. Recall that Brad is 30 years old. He also has a driving

> Recall that the Sampsons have a goal of saving about $300 per month ($3,600 per year) for their children’s college education. They want to estimate how this money would grow over time if they invest it in stock. Dave and Sharon have never owned stock bef

> Brad Brooks listened to your advice about reducing the use of his smartphone (which saves him $250 per month) and reducing his entertainment expenses by $200 per month. He still rents the condo for $1,000 per month. However, now Brad has the urge to upgr

> What is an amortization table? What does each mortgage payment represent?

> What are the two financial components you must consider before purchasing a home? Why should you consider them?

> Explain how stronger economic conditions affect the values of homes.

> Assume that the Sampsons have paid off their credit card debt and have also achieved their goal of saving $5,000 that they will use as a down payment on a new car. (They have also been saving an additional $300 per month over the last year for their chil

> Assume that the Sampsons have paid off their credit card debt and have also achieved their goal of saving $5,000 that they will use as a down payment on a new car. (They have also been saving an additional $300 per month over the last year for their chil

> What are stock exchanges? How do they facilitate the trading of stocks?

> The top managers of a publicly traded manufacturing company are reviewing the projected fourth quarter financial results in late November. Based on the projected sales, the company will fall short of its yearly profit goals. This will result in the compa

> What are some limitations of stock analysis?

> What is technical analysis? What is fundamental analysis?

> Recall that the Sampsons have a goal of saving about $300 per month ($3,600 per year) for their children’s college education. They want to estimate how this money would grow over time if they invest it in stock. Dave and Sharon have never owned stock bef

> What determines stock price? How do investors use this information to make buy or sell decisions?

> What is the OTC? What is the role of a market maker?

> How can another country’s economic conditions affect a U.S. firm and therefore its stock price?

> What is a short sale? When would this strategy be used?

> Why is an industry analysis of stocks important? List some sources of information about firms and their industry.

> What is inflation? How is inflation measured? How does inflation affect stock prices?

> How do interest rates affect economic growth? Why do interest rates affect some stock prices more than others? Which federal agency influences interest rates?

> Explain how economic growth is measured. How does economic growth affect stock prices? What are some popular indicators of economic growth? How does the government’s fiscal policy affect economic growth?

> Why may the top managers of a firm be tempted to use misleading estimates of revenues and expenses? How may managers be able to boost the reported earnings of their firm?

> List the characteristics of a firm that investors analyze by using the balance sheet and the income statement.

> Recall that the Sampsons have a goal of saving about $300 per month ($3,600 per year) for their children’s college education. They want to estimate how this money would grow over time if they invest it in stock. Dave and Sharon have never owned stock bef

> Why is it necessary to analyze a firm? What is an annual report? What information does it contain to aid the analysis?

> What is buying a stock on margin? What may happen if the value of the stock bought on margin declines? What are the advantages to investors and brokerage firms when stocks are bought on margin?

> Discuss the differences between a market order, a limit order, and a stop order.

> What information must you provide when placing an order to buy or sell stock? What is a ticker symbol, and why is it important?

> What are some advantages of using online brokerage services? Describe how an investor would set up and use an online brokerage account.

> How is the market for a stock created? How do brokerage firms expedite this process? Compare the two types of brokerage services.

> What are electronic communications networks (ECNs)? How are ECNs used?

> Describe a typical stock transaction at the New York Stock Exchange (NYSE). What are floor traders? What are specialists? What other exchanges trade stocks in a similar manner to the NYSE?

> What are stocks? How are stocks beneficial to corporations? Why do investors invest in stocks?

> How does your personal tolerance for risk impact your investment decisions?