Asked by Katherine Lopez on Jul 26, 2024
Verified
Assume the company has 50 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap.The sale of these defective units will have no effect on the company's other sales.Which of the following costs is relevant in this decision?
A) $11 variable manufacturing cost
B) $19 unit product cost
C) $1 variable selling and administrative cost
D) $26 full cost
Variable Manufacturing Cost
Costs in manufacturing that vary with the level of output, including costs such as raw materials and direct labor.
Unit Product Cost
The total cost (direct materials, direct labor, and manufacturing overhead) associated with producing one unit of a product.
Reduced Price
The selling price of a product or service after it has been discounted from the original or standard price.
- Investigate the role of multiple forms of costs and revenues in the context of decision-making activities.
Verified Answer
Reference: CH11-Ref15
The Bharu Violin Corporation has the capacity to manufacture and sell 5,000 violins each year but is currently only manufacturing and selling 4,800.The following data relate to annual operations at 4,800 units:
Woolgar Symphony Orchestra is interested in purchasing Bharu's excess capacity of 200 units but only if they can get the violins for $350 each.This special order would not affect regular sales or the total fixed costs.
Learning Objectives
- Investigate the role of multiple forms of costs and revenues in the context of decision-making activities.
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