chapter 7

chapter 7 - make-or-buy are the variable manufacturing...

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John Rubinetti AC 12 2/25/2008 Chapter 7 Questions 5. Data must be processed and analyzed first before a company decides if they should accept a special order. If they are going to accept the special order the managers must determine if the sales of the product in other markets would not be affected by the special order. This company would then consider sales lost if they found out that that other sales were affected. However if this company is operating at full capacity usually there is a chance that the order will be dismissed. Generally if the company wanted to accept this order they would have to have the order absorb the additional fixed and variable manufacturing costs as well as have to expand the plant size. 6. The manufacturing costs relevant to the Son Ly Company in making the decision to
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Unformatted text preview: make-or-buy are the variable manufacturing costs, the purchasing price and the opportunity costs. 11. In incremental analysis sunk costs are irrelevant because a sunk cost is defined as a cost that cannot be changed by any present or future decision. However, any trade-in allowance or cash disposal value of the existing asset is relevant since the value will not be realized if the asset remains in use. If an asset is retained, equipment or machine, the book value will be depreciated over its remaining useful life. Unless a company receives a new unit then the book value will be recognized as a loss. In retrospect, regardless of the replacement decision, the effect of the book value on current and future earnings is the same....
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This note was uploaded on 04/29/2008 for the course AC 12 taught by Professor Caster during the Spring '08 term at Fairfield.

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