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Log in through your institution journal article Decision Making When Joint Products are InvolvedThe Accounting Review Vol. 46, No. 4 (Oct., 1971) , pp. 746-755 (10 pages) Published By: American Accounting Association https://www.jstor.org/stable/244253 Read and download Log in through your school or library Subscribe to JPASS Unlimited reading + 10 downloads Journal Information The Accounting Review is the premier journal for publishing articles reporting the results of accounting research and explaining and illustrating related research methodology. The scope of acceptable articles embraces any research methodology and any accounting-related subject. The primary criterion for publication in The Accounting Review is the significance of the contribution an article makes to the literature. Publisher Information The American Accounting Association is the world's largest association of accounting and business educators, researchers, and interested practitioners. A worldwide organization, the AAA promotes education, research, service, and interaction between education and practice. Formed in 1916 as the American Association of University Instructors in Accounting, the association began publishing the first of its ten journals, The Accounting Review, in 1925. Ten years later, in 1935, the association changed its name to become the American Accounting Association. The AAA now extends far beyond accounting, with 14 Sections addressing such issues as Information Systems, Artificial Intelligence/Expert Systems, Public Interest, Auditing, taxation (the American Taxation Association is a Section of the AAA), International Accounting, and Teaching and Curriculum. About 30% of AAA members live and work outside the United States. Rights & Usage This item is part of a JSTOR Collection. a specific set of procedures that, when followed, produces a decision. the difference in total cost between the alternatives in a decision. expected future costs that change across alternatives. Both quantitative and qualitative. the benefit given up or sacrificed when one alternative is chosen over another. costs for which the outlay has already been made and that cannot be affected by a future decision. relevant costing analyses that focus on whether a component should be made internally or purchased externally. relevant costing analyses that focus on whether a specially priced order should be accepted or rejected. relevant costing analyses that focus on keeping or dropping a segment of a business. a subunit of a company of sufficient importance to warrant the production of performance reports. fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated. fixed expenses that cannot be traced to individual segments or products. They will continue to exist even if one segment or product is eliminated. the contribution a segment makes to cover common fixed costs and provide for profit after direct fixed costs and variable costs are deducted from the segment's sales revenue. products that are inseparable prior to a split-off point. All manufacturing costs up to the split-off point are joint costs. the point at which products become distinguishable after passing through a common process. sell-or-process-further decision relevant costing analysis that focuses on whether a product should be processed beyond the split-off point. mathematical expressions that express resource limitations. a method of determining the cost of a product or service based on the price that customers are willing to pay. the difference between the sales price needed to achieve a
projected market share and the desired per-unit profit. sunk costs are considered... Renting out an auditorium on a weeknight when it is not being used for other functions is an example of a special-order decision. (True or False) Special orders should be accepted when the incremental revenues from the order will be less than the incremental costs. (True or False) Excess capacity means that a company is paying for more manufacturing or service capacity than it currently has offers from customers to use. (True or False) Adding a new mobile phone to a product line is an example of a keep-or-drop decision. (True or False) A complementary effect occurs whenever a tactical business decision is expected to have implications for another aspect of the business. (True or False) Price using markup equals cost per unit plus the cost per unit multiplied by the Which of the following is true of a decision model? Which of the following statements is true of relevant costs? b. They are future costs that do not differ across alternatives. Which of the following is true of an opportunity cost? Which of the following is a cost that cannot be affected by any future action? Jack Corporation manufactures steel pipes. It receives a proposal from Crimson Traders to supply Crimson with 4,500 units of pipes. This is a one-time order and will not affect the other sales of the
company. Which of the following is most likely to be a relevant cost for Jack Corporation in determining whether it should accept this order or not? Which of the following is most likely to be true of keep-or-drop decisions? Which of the following will help an organization decide whether to keep or drop a product line? Segmented income statements allow managers to decide on whether or not to drop a business segment. (True or False) Which of the following is true of the term product mix? a. It refers to the composition of raw material of the primary product sold by the company. Diamond Materials Corp. produces two types of paper, regular and glossy, with unit contribution margins of $5 and $7, respectively. Each paper must be processed by a special machine. The firm
owns four such machines that together provide 12,000 hours of machine time per year. Regular paper requires 0.05 hours of machine time, whereas glossy paper requires 0.20 hours of machine time. What is the contribution margin per hour of machine time for regular paper? Sapphire Corporation, which is a company involved in detailing, has customers who would be willing to pay $55 per detail. The
company requires a 70 percent markup on each job. The average job would cost $25. Sapphire uses markup pricing to set the price of each job. What is the price Sapphire Corporation should quote to a new customer? b $68.24 - ($68.24 x 0.15) Alpha Telecommunications has designed a new product
with a target cost of $58. It requires the new product to have a profit of 15 percent. What is the target price for the new product? a. $66.70 The opportunity cost of making a component part in a factory with no excess capacity is the: Manor Company plans to discontinue a department that has a contribution margin of $24,000 and $48,000 in fixed costs. Of the fixed costs, $21,000 cannot be eliminated. The effect of this discontinuance on Manors net income would be a(an): The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000. The sunk cost in this situation is: The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000. What is the advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition? When there is a production constraint, the company should emphasize the products with: A general rule in relevant cost analysis is: Decisions that involve choosing between different alternatives that attempt to provide a competitive advantage over a particular time frame are called: When a manager makes a sell-or-process-further decision, _____. Jones Inc., a cosmetics manufacturer, has been asked to provide a private label version of its most popular lip stick by a large discount chain. The tubes would be labeled with the name of the chain and the chain would pay Jones $4.10 per tube rather than the regular $5.00 price. Which type of decision is this? Ace Manufacturing produces two products: A and B. Unit contribution margins for A and B are $30 and $60 respectively. Product A uses 1 direct labor hour, and product B uses 4 direct labor hours. Direct labor is Ace's constrained resource. What is the contribution margin per direct labor hour for each product? When the activity level of a firm changes, _____. Which of the following mathematical techniques is used to solve a product mix problem in the presence of multiple constraints? Identify the equation used to
calculate the target cost of a product. Which of the following is a method of determining the cost of a product or service based on the price that customers are willing to pay? Which of the following mathematical techniques is used to solve a product mix problem in the presence of multiple constraints? Which of the following is a critical concern when deciding how much of each product type
to produce and sell when there exists a scarce resource? Grant Company owns four machines that provide 17,550 machine hours per year. Part X requires 1.5 hours, and Part Y requires 0.5 hours. The respective unit
contribution margins for Part X and Y are $60 and $33. If a maximum of 22,800 units of each part can be sold, what is optimal mix of parts? Tactical or Relevant decisions short-run decision making that involves making choices among alternatives. Can also have long term consequences. Is joint cost relevant for decision making?Answer and Explanation: The given statement is true. The joint costs are relevant in deciding what to do with the product after the point of split-off.
Which of the following will help an organization decide whether to keep or drop a product line?Which of the following will help an organization decide whether to keep or drop a product line? Segmented income statements allow managers to decide on whether or not to drop a business segment.
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A decision that involves potential further processing of joint products is which kind of decision?
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