Decision Making Paper 4

1

The loss of a key customer has temporarily caused Bedford Machining to have some excess manufacturing capacity. Bedford is considering the acceptance of a special order, one that involves Bedford’s most popular product Consider the following types of costs.
I. Variable costs of the product
II. Fixed costs of the product
III. Direct fixed costs associated with the order
IV. Opportunity cost of the temporarily idle capacity
Which one of the following combinations of cost types should be considered in the special order acceptance decision?






2

Raymund currently sells its only product to a single customer. Raymund has received a one-time-only order for 2,000 units from another buyer. Sale of the special order items will not require any additional selling effort. In negotiating a price for the special order, Raymund should set the minimum per unit selling price at






3

In a make-versus-buy decision, the relevant costs include variable manufacturing costs as well as






4

A company’s approach to an insourcing vs outsourcing decision






5

Costs relevant to an insourcing vs. outsourcing decision include variable manufacturing costs as well as






6

In an insourcing vs. outsourcing situation, which of the following qualitative factors is usually considered?






7

In an insourcing vs. outsourcing decision, the decision process favors the use of total costs rather than unit costs. The reason is that






8

Which of the following qualitative factors favors the buy choice in an insourcing vs. outsourcing decision?






9

Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If Regis Company purchases the plugs but does not rent the unused facility, the company would






10

Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in savings annually. To achieve this goal, the minimum annual rent on the facility must be






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