Sarah's Talking Dolls Manufactures a Computer Chip Used in the Production

question 126

Essay

Sarah's Talking Dolls manufactures a computer chip used in the production of dolls for children.When 5,000 dolls are produced,the costs per part are:

Sam's Associates has offered to sell Sarah's Talking Dolls 5,000 parts for $5.75 each.If Sarah accepts the offer,fixed manufacturing costs will decrease by $1.00 per unit.
A)What is the relevant per unit cost to manufacture the part?
B)Which alternative is best for Sarah's Talking Dolls and by how much?

• A)What is the relevant per unit cost to manufacture the part?
• B)Which alternative is best for Sarah's Talking Dolls and by how much?

Understand the concept of residual income as a performance evaluation metric.

Calculate divisional performance using residual income.

Analyze the impact of internal transactions on divisional and overall company profitability.

Determine the appropriate cost allocation for shared services between different parts of an organization.

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Definitions:

Social Structure

The rule-governed relationships-with all their rights and obligations- that hold members of a society together. This includes households, families, associations, and power relations, including politics.

Trance

A state of mind in which a person loses voluntary action and is highly responsive to suggestion or direction, often used in spiritual or therapeutic settings.

Rain

Precipitation in the form of water droplets that fall from clouds in the atmosphere to the Earth's surface.

Myth

A classic tale, often relating to the ancient history of a community or interpreting a natural or societal event, usually featuring mythical creatures or occurrences.