Question 1

A major advantage of markup pricing is that standard markups are easy to apply.

Accepted Answer

A) True 
 B)False

Question 2

Figure 13-8. Kerrigan Lumber Yard receives 12,000 large trees each year that they process into rough logs.Currently,Kerrigan sells the rough logs for $75 each.Kerrigan is considering processing the logs further into refined lumber.Each log can be processed into 200 feet of refined lumber at an additional cost of $0.40 per foot.The refined lumber can be sold for $0.95 per foot.
Refer to Figure 13-8.Should Kerrigan process the rough logs into refined lumber?

Accepted Answer

A) Yes,income will increase by $35 per log. 
B) Yes,income will increase by $110 per log. 
C) Yes,income will increase by $75 per log. 
D) No,income will decrease by $35 per log. 
E) No,income will decrease by $110 per log. 
A) Yes,income will increase by $35 per log. 
B) Yes,income will increase by $110 per log. 
C) Yes,income will increase by $75 per log. 
D) No,income will decrease by $35 per log. 
E) No,income will decrease by $110 per log.

Question 3

Moss Company charges cost plus 35%.What is the price of an item with cost equal to $65?

Accepted Answer

A) $73.25 
B) $95.80 
C) $87.75 
D) $65.50 
E) $22.75 
A) $73.25 
B) $95.80 
C) $87.75 
D) $65.50 
E) $22.75

Question 4

Sherpa Company manufactures tents and sleeping bags.Tents are priced at $80,have variable cost of $55,and direct fixed costs of $120,000.Sleeping bags are priced at $60,have variable cost of $35,and direct fixed costs of $66,000.Common fixed costs equal $200,000.Last year,the division sold 5,000 tents and 10,000 sleeping bags.

Accepted Answer

The answer of Sherpa Company manufactures tents and sleeping bags.Tents...

Question 5

The benefit sacrificed when one alternative is chosen over another is called sunk cost.

Accepted Answer

A) True 
 B)False

Question 6

Figure 13-9. Sabor Inc.is a medical testing laboratory that performs several tests and analyses for hospitals in the area.Four of the tests that they perform require the use of a specialized machine that can supply 14,000 hours per year.Information on the four lab tests follows:
  Refer to Figure 13-9.What is the contribution margin per hour of machine time for Test B?

Accepted Answer

A) $20.50 
B) $33 
C) $16.25 
D) $16.50 
E) $18 
A) $20.50 
B) $33 
C) $16.25 
D) $16.50 
E) $18

Question 7

Figure 13-4. Connolly Company produces two types of lamps,classic and fancy,with unit contribution margins of $13 and $21,respectively.Each lamp must spend time on a special machine.The firm owns four machines that together provide 18,000 hours of machine time per year.The classic lamp requires 0.20 hours of machine time,the fancy lamp requires 0.50 hours of machine time.
Refer to Figure 13-4.What is the contribution margin per hour of machine time for a classic lamp?

Accepted Answer

A) $26 
B) $104 
C) $16 
D) $65 
E) $13 
A) $26 
B) $104 
C) $16 
D) $65 
E) $13

Question 8

Boone Products had the following unit costs:   A one-time customer has offered to buy 2,000 units at a special price of $48 per unit.Because of capacity constraints,1,000 units will need to be produced during overtime.Overtime premium is $8 per unit.How much additional profit or loss will be generated by accepting the special order?

Accepted Answer

A) $30,000 loss 
B) $4,000 loss 
C) $24,000 loss 
D) $4,000 profit 
A) $30,000 loss 
B) $4,000 loss 
C) $24,000 loss 
D) $4,000 profit

Question 9

In making a short-run decision,all alternatives need to be considered.

Accepted Answer

A) True 
 B)False

Question 10

Figure 13-2. ColorPro uses part 87A in the production of color printers.Unit manufacturing costs for part 87A are:
  ColorPro uses 100,000 units of 87A per year.Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12.Fixed overhead is unavoidable.
Refer to Figure 13-2.Should ColorPro make or buy the part?

Accepted Answer

A) Make the part because it will save $100,000 over buying it 
B) Buy the part because it will save $100,000 over making it 
C) Make the part because it will save $1,100,000 over buying it 
D) Buy the part because it will save 1,100,000 over making it 
E) Buy the part because it will save $300,000 over making it 
A) Make the part because it will save $100,000 over buying it 
B) Buy the part because it will save $100,000 over making it 
C) Make the part because it will save $1,100,000 over buying it 
D) Buy the part because it will save 1,100,000 over making it 
E) Buy the part because it will save $300,000 over making it

Question 11

Stars Manufacturing Company produces Products A1,B2,C3,and D4 through a joint process.The joint costs amount to $200,000.   If Product B2 is processed further,profits will

Accepted Answer

A) increase by $30,000. 
B) decrease by $3,000. 
C) increase by $32,000. 
D) increase by $2,000. 
A) increase by $30,000. 
B) decrease by $3,000. 
C) increase by $32,000. 
D) increase by $2,000.

Question 12

The Exchange Company is in the process of developing a new product called LS500.The company requires a 35% profit.The LS500 current design carries with it a total cost of $125.
Required:
A.What is the sales price of the LS500 using markup costing?
B.Assume that the Exchange Company's marketing department has determined that consumers are willing to pay $140 for the LS500.What is the target cost for this product?

Accepted Answer

A.$125 x 1.35 = $168

Question 13

An important qualitative factor to consider regarding a special order is the

Accepted Answer

A) variable costs associated with the special order. 
B) avoidable fixed costs associated with the special order. 
C) effect the sale of special-order units will have on the sale of regularly priced units. 
D) incremental revenue from the special order. 
A) variable costs associated with the special order. 
B) avoidable fixed costs associated with the special order. 
C) effect the sale of special-order units will have on the sale of regularly priced units. 
D) incremental revenue from the special order.

Question 14

When managers are considering the optimal product mix,they are most concerned with

Accepted Answer

A) maximizing revenue. 
B) minimizing cost. 
C) maximizing profit. 
D) minimizing selling and administrative expense. 
E) balancing productive capacity. 
A) maximizing revenue. 
B) minimizing cost. 
C) maximizing profit. 
D) minimizing selling and administrative expense. 
E) balancing productive capacity.

Question 15

The method of determining the cost of a product or service based on the price that customers are willing to pay is called

Accepted Answer

A) relevant costing. 
B) differential costing. 
C) target costing. 
D) product costing. 
E) overall costing. 
A) relevant costing. 
B) differential costing. 
C) target costing. 
D) product costing. 
E) overall costing.

Question 16

"The accounting decision making model is not useful in real life because it only looks at the numbers." Critique this statement and give an example for which it does not hold true.

Accepted Answer

The decision-making model described in C

Question 17

Aerotoy Company makes toy airplanes.One plane is an excellent replica of a 737; it sells for $5.Vacation Airlines wants to purchase 12,000 planes at $1.75 each to give to children flying unaccompanied.Costs per plane are as follows:   No variable marketing costs would be incurred.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable.However,Vacation Airlines wants its own logo and colors on the planes.The cost of the decals is $0.01 per plane and a special machine costing $1,500 would be required to affix the decals.After the order is complete,the machine would be scrapped.Should the special order be accepted?

Accepted Answer

A) Yes,income will increase by $300 
B) No,income will decrease by $180 
C) No,income will decrease by $1,500 
D) Yes,income will increase by $180 
E) It doesn't matter; there will be no change in income 
A) Yes,income will increase by $300 
B) No,income will decrease by $180 
C) No,income will decrease by $1,500 
D) Yes,income will increase by $180 
E) It doesn't matter; there will be no change in income

Question 18

Rippey Corporation manufactures a single product with the following unit costs for 5,000 units:
   Recently,a company approached Rippey Corporation about buying 1,000 units for $225.Currently,the models are sold to dealers for $412.50.Rippey's capacity is sufficient to produce the extra 1,000 units.No additional selling expenses would be incurred on the special order.
Required:

Accepted Answer

The answer of Rippey Corporation manufactures a single product with...

Question 19

Figure 13-9. Sabor Inc.is a medical testing laboratory that performs several tests and analyses for hospitals in the area.Four of the tests that they perform require the use of a specialized machine that can supply 14,000 hours per year.Information on the four lab tests follows:
  Refer to Figure 13-9.What is the contribution margin per hour of machine time for Test C?

Accepted Answer

A) $48 
B) $35 
C) $13 
D) $16 
E) $24 
A) $48 
B) $35 
C) $13 
D) $16 
E) $24

Question 20

Manning Company uses a joint process to produce products W,X,Y,and Z.Each product may be sold at its split-off point or processed further.Additional processing costs of specific products are entirely variable.Joint processing costs for a single batch of joint products are $120,000.Other relevant data are as follows:   Which products should Manning process further?

Accepted Answer

A) All 
B) all except Z 
C) Y and X 
D) None 
A) All 
B) all except Z 
C) Y and X 
D) None

A major advantage of markup pricing is that standard markups are easy to apply.

Moss Company charges cost plus 35%.What is the price of an item with cost equal to $65?

The benefit sacrificed when one alternative is chosen over another is called sunk cost.

In making a short-run decision,all alternatives need to be considered.

Stars Manufacturing Company produces Products A1,B2,C3,and D4 through a joint process.The joint costs amount to $200,000. If Product B2 is processed further,profits will

An important qualitative factor to consider regarding a special order is the

When managers are considering the optimal product mix,they are most concerned with

The method of determining the cost of a product or service based on the price that customers are willing to pay is called

"The accounting decision making model is not useful in real life because it only looks at the numbers." Critique this statement and give an example for which it does not hold true.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 13: Short-Run Decision Making: Relevant Costing

A major advantage of markup pricing is that standard markups are easy to apply.

Moss Company charges cost plus 35%.What is the price of an item with cost equal to $65?

The benefit sacrificed when one alternative is chosen over another is called sunk cost.

In making a short-run decision,all alternatives need to be considered.

Stars Manufacturing Company produces Products A1,B2,C3,and D4 through a joint process.The joint costs amount to $200,000. If Product B2 is processed further,profits will

An important qualitative factor to consider regarding a special order is the

When managers are considering the optimal product mix,they are most concerned with

The method of determining the cost of a product or service based on the price that customers are willing to pay is called

"The accounting decision making model is not useful in real life because it only looks at the numbers." Critique this statement and give an example for which it does not hold true.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters