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    Relevant Costing and Short-Run Decision Making

    Relevant Costing

    Relevant Costing Poor decision making may result when acceptable prices are determined by adding a fixed percentage to the "full cost" of a product when that "full cost" includes a unitized fixed cost. 1. In a case where any selling price above the contribution margin will add to the wealth of the firm; is there a danger i

    Relevant Costs: Merchant Company dropping a product

    5-50 Relevant Costs: dropping a product Merchant Company manufactures and sells three models of electronic printers. Ken Gail, president of the company, is considering dropping model JT484 from its product line because the company has experienced losses for this product over the past three quarters. The following product-leve

    Relevent costing: Example problem

    Outsourcing switches for $20 bucks each. The Co is considering making the switches internally and has conducted a study to determine the costs involved. Below are projected annual production costs: Unit level material costs $3.00 Unit level; labor costs $2.00 Unit level overhead costs $1.00

    Relevant costing: Incremental analysis

    Maggie Sharrer, a recent graduate of Rolling's accounting program, evaluated the operating performance of Poway Company's six divisions. Maggie made the following presentation to Poway's Board of Directors and suggested the Erie Division be eliminated. "If the Erie Division is eliminated," she said, "our total profits would incr

    Opportunity Costs, Identification of Relevant Costs

    1. Why are historical or past data irrelevant to special decisions? 2. "Any future cost is relevant." Do you agree? Explain. 3. Paul and Paula Petroceli were trying to decide whether to go to the symphony or to the baseball game. They already have two nonrefundable tickets to "Pops Night at the Symphony" that cost $40

    Problem on Relevant Costs

    Kentucky Motors has manufactured compressor parts at its plant in Pitcairn, Indiana, for the last 18 years. An outside supplier, Superior Compressor Company, has offered to supply compressor model A238 at a price of $200 per unit. Unit manufacturing costs for A238 are as follows: Direct materials $80 Direct Labor

    Relevant and Sunk Costs

    Karen's Cookie Company is considering replacing its giant cookie mixer with a new one. The following data has been compiled to evaluate the function: EXISTING NEW Original Cost $8,000 $10,000 Annual Operating Cost $4,000 $2,200 Remaining Life 5 years 5 years Disposal value now $3,000 a. Wh

    Relevant Costing for the Opportunity Cost

    Explanation of Spreadsheet: Primarily this question is one that resolves around incremental revenues and costs. According to my textbook, relevant information involves "costs or benefits that are different for each course of action". Horngren in another textbook on management accounting highlights that an "incremental co