Chapter 7 Lab Exercise Solutions

Chapter 7 Lab Exercise Solutions - Ch 7 Relevant Costs and...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Ch 7 – Relevant Costs and Produce Planning Decisions SOLUTION 1 Indicate whether the following statements are True (T) or False (F): __ F ___ Special-order decisions are long-run decisions. __ F ___ If extra-capacity exists, a company should always agree to accept a special order at a reduced sales price. __ F ___ A company will never make any profit on a special order if the special order’s sales price is below the normal sales price charge to other customers. __ T ___ Fixed costs are relevant to special-order decisions only when they differ between alternatives. __ F ___ Only quantitative data should be considered in special order and make or buy decisions. __ T ___ The “theory of constraints” is a management tool where bottlenecks in the production process are identified and attempted to be eliminated. __ F ___ A product should be processed further if the additional cost is greater than the additional revenue. __ T ___ In a multi-product environment with a resource constraint (i.e. labor hours available), managers should maximize the contribution margin per unit of limited resource. __ T ___ A relevant cost is one that differs between alternatives. __ F ___ A product line should be dropped whenever it has negative net income. Only if the decrease in contribution margin is less than the decrease in fixed c o s t .
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 (Special-Order Decision) Adventure Entertainments sells tickets to its amusement park for $35 each. Variable costs per person (ticket) are $4.00 and total fixed costs are $600,000 within a certain relevant range. The company has been contacted by a local charity asking if they could buy 100 discounted tickets for $10.00 each. Assuming that the company has excess capacity within the relevant range, what would be the effect on net income if Adventure Entertainments accepts this special order? Short way
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/22/2010 for the course ACC 200 taught by Professor Buckless during the Spring '08 term at N.C. State.

Page1 / 5

Chapter 7 Lab Exercise Solutions - Ch 7 Relevant Costs and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online