santos company currently manufactures one of its crucial parts at a cost of 3 40 per 473900

Module 8 Review Questions I. Relevant costs Fill in each of the blanks below with the correct term. 1. Relevant costs are also known as _____________. 2. An ___________ requires a future outlay of cash and is relevant for current and future decision making. 3. An ___________ is the potential benefit lost by taking a specific action when two or more alternative choices are available. 4. A ___________ arises from a past decision and cannot be avoided or changed; it is irrelevant to future decisions. 5. ___________ refer to the incremental revenue generated from taking one particular action over another. II. Make or buy decision Santos Company currently manufactures one of its crucial parts at a cost of $3.40 per unit. This cost is based on a normal production rate of 50,000 units per year. Variable costs are $1.50 per unit, fixed costs related to making this part are $50,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Santos is considering buying the part from a supplier for a quoted price of $2.70 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses. III. Sell of process decision Cantrell Company has already manufactured 20,000 units of Product A at a cost of $20 per unit. The 20,000 units can be sold at this stage for $500,000. Alternatively, the units can be further processed at a $300,000 total additional cost and be converted into 4,000 units of Product B and 8,000 units of Product C. Per unit selling price for Product B is $75 and for Product C is $50. Prepare an analysis that shows whether or not the 20,000 units of Product A should be processed further. IV. Sell or rework decision Varto Company has 7,000 units of its sole product in inventory that it produced…