20.2   Resolve conflicts that can arise from the results of EOQ and performance models.   1) Goal-congruence problems may occur when an inconsistency evolves between the decision model used and the model used to evaluate the performance of the person implementing the decision.   2) If annual carrying costs are excluded when evaluating the performance of managers, the managers may favour purchasing in larger order quantities.   3) Companies can achieve significant gains by sharing information and coordinating activities throughout the supply chain. 4) When there is an inconsistency between the decision model and the model used to evaluate […]

92) Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers: Direct materials$66 Direct labor30 Variable manufacturing support48 Fixed manufacturing support104 Total manufacturing costs248 Markup (50%)124 Targeted selling price$372 Parker and Spitzer Manufacturing has excess capacity. Required: a.What is the full cost of the product per unit? b.What is the contribution margin per unit? c.Which costs are relevant for making the decision regarding this one-time-only special order? Why? d.For Parker and Spitzer Manufacturing, […]

14) Put the following steps in order for using the high-low method of estimating a cost function: A = Identify the cost function B = Calculate the constant C = Calculate the slope coefficient D = Identify the highest and lowest observed values A) D C A B B) C D A B C) A D C B D) D C B A 15) Regression analysis: A) is simple to compute B) measures the change in a dependent variable associated with one or more independent variables C) is mathematical so it does not require an understanding of operations D) uses […]

4) It can be inferred that when there is a high correlation between two variables, one is the cause of the other. 5) An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs. 6) Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year. 7) What are the two assumptions behind a simple linear cost function? Briefly explain the three ways that a linear cost function may behave? 1) The conference method […]

23) At the end of the fiscal year, the fixed overhead spending variance is always prorated among work-in-process control, finished goods control, and cost of goods sold on the basis of the fixed overhead allocated to these accounts. 24) Lungren has budgeted construction overhead for August of $260,000 for variable costs and $435,000 for fixed costs. Actual costs for the month totaled $275,000 for variable and $445,000 for fixed. Allocated fixed overhead totaled $440,000. The company tracks each item in an overhead control account before allocations are made to individual jobs. Spending variances for August were $10,000 unfavorable for variable […]