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Chapter 25: 25-5RQ (page 1406)
When is nonfinancial information relevant?
The non-financial information is considered relevant when managers are required to makequalitative decisionsassociated with the business.
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Explain the difference between price-takers and price-setters.
Brik, located in San Antonio, Texas, produces two lines of electric toothbrushes: deluxe and standard. Because Brik can sell all the toothbrushes it can produce, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the following data:
Per Unit
Deluxe Toothbrush Standard Toothbrush
Sales price \(88 \)54
Variable expense 22 18
Contribution margin \(66 \)36
Contribution margin ratio 75.0% 66.7%
After expansion, the factory will have a production capacity of 4,900 machine hours per month. The plant can manufacture 65 standard electric toothbrushes or 27 deluxe electric toothbrushes per machine hour.
Requirements
1. Identify the constraining factor for Brik.
2. Prepare an analysis to show which product line the company should emphasize.
What is the decision rule concerning products to emphasize when facing a constraint?
What questions should managers answer when considering special pricing orders?
Doherty Company is considering replacing the individual printers each employee in the corporate office currently uses with a network printer located in a central area. The network printer is more efficient and would, therefore, cost less to operate than the individual printers. However, most of the office staff think having to use a centralized printer would be inconvenient. They prefer to have individual printers located at each desk. Identify the following information as financial or nonfinancial and relevant or irrelevant. The first item has been completed as an example.
Financial | Nonfinancial | Relevant | Irrelevant | |
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