12 2 evaluate existing information to decide on a competitive price for a special or 4302799

 

12.2   Evaluate existing information to decide on a competitive price for a special order.

 

1) Special orders increase income if the revenue from the order exceeds the incremental variable and fixed costs incurred to fill the order.

 

2) In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered irrelevant data.

 

3) A price-bidding decision for a one-time-only special order includes an analysis of

A) only marketing costs.

B) all cost drivers.

C) all costs of each function in the value chain.

D) only fixed manufacturing costs.

E) indirect costs of each category in the value chain.

 

4) Decisions on the price to bid on a one-time-only special order should include

A) only cost data.

B) only the potential bids of competitors.

C) existing fixed manufacturing overhead.

D) cost data, and the use of variable costing income statements.

E) cost data and potential bids of competitors.

5) Your company produces 700,000 widgets per year but has the capacity to produce 950,000 units. Company records show the following; full product costs = $85 per unit, which includes fixed manufacturing overhead of $11, and variable overhead of $4 per unit, and direct variable costs of $22, all based on the current 700,000 production run. If the company wanted to bid on a special one-time order, based on the above information only, what would be its minimum bid?

A) $59

B) $81

C) $63

D) $74

E) $85

 

Use the information below to answer the following question(s).

 

Action Mopeds manufactures mopeds. The following information pertains to the company's normal operations per month:

 

Output units	15,000 mopeds
Machine-hours	4,000 hours
Direct manufacturing labour hours	5,000 hours
Direct manufacturing labour per hour	$24
Direct materials per unit	$200
Variable manufacturing overhead costs	$322,500
Fixed costs:
Fixed manufacturing overhead costs	$1,200,000
Marketing and distribution costs	$1,125,000
Research and development costs	$900,000

 

6) What is the unit cost for establishing a minimum bid on a one-time-only special order of 1,000 mopeds from an overseas city if all cost relationships remain the same except for a one-time setup charge of $40,000?

A) $269.50

B) $309.50

C) $444.50

D) $260.50

E) $209.50

7) What is the unit cost when establishing a long-run price for mopeds?

A) $309.50

B) $325.48

C) $444.50

D) $460.50

E) $470.00

 

Answer the following question(s) using the information below.

 

Rogers' Heaters is approached by Ms. Yukki, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Rogers' Heaters has excess capacity. The following per unit data apply for sales to regular customers:

 

Direct materials	$200
Direct manufacturing labour	60
Variable manufacturing support	30
Fixed manufacturing support	100
Total manufacturing costs	390
Markup (30%)	117
Estimated selling price	$507

 

8) For Rogers' Heaters, what is the minimum acceptable price of this one-time-only special order?

A) $290

B) $390

C) $260

D) $507

E) $377

9) If Ms. Yukki wanted a long-term commitment for supplying this product, what price would most likely be quoted to her?

A) $290

B) $390

C) $260

D) $377

E) $507

 

Answer the following question(s) using the information below.

 

Gerry's Generator Supply is approached by Mr. Gladstone, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Gerry's Generator Supply has excess capacity. The following per unit data apply for sales to regular customers:

 

Direct materials	$850
Direct manufacturing labour	50
Variable manufacturing support	100
Fixed manufacturing support	75
Total manufacturing costs	1,075
Markup (20%)	215
Estimated selling price	$1,290

 

10) For Gerry's Generators, what is the minimum acceptable price of this one-time-only special order?

A) $900

B) $1,000

C) $1,075

D) $1,290

E) $1,200