Question 1

In a make or buy decision, the opportunity cost of capacity could

Accepted Answer

A)  be considered to decrease the price of units purchased from suppliers. 
B)  be considered to decrease the cost of units manufactured by the company. 
C)  be considered to increase the price of units purchased from suppliers. 
D)  not be considered since opportunity costs are not part of the accounting records. 
A)  be considered to decrease the price of units purchased from suppliers. 
B)  be considered to decrease the cost of units manufactured by the company. 
C)  be considered to increase the price of units purchased from suppliers. 
D)  not be considered since opportunity costs are not part of the accounting records.

Question 2

A company may outsource some of its production in order to focus on core competencies.

Accepted Answer

A) True 
 B)False

Question 3

Broncho Boot Corporation has been asked to submit a bid on supplying 1,000 pairs of military combat boots to the Armed Forces Training Center. The company's costs per pair of boots are as follows:   Assuming that there would be no commission on this potential sale, the lowest price the firm can bid is some price greater than

Accepted Answer

A)  $23. 
B)  $20. 
C)  $17. 
D)  $14. 
A)  $23. 
B)  $20. 
C)  $17. 
D)  $14.

Question 4

Haskins Company is currently operating at a loss of $15,000. The sales manager has received a special order for 5,000 units of product, which normally sells for $35 per unit. Costs associated with the product are: direct material, $6; direct labor, $10; variable overhead, $3; applied fixed overhead, $4; and variable selling expenses, $2. The special order would allow the use of a slightly lower grade of direct material, thereby lowering the price per unit by $1.50 and selling expenses would be decreased by $1. If Haskins wants this special order to increase the total net income for the firm to $10,000, what sales price must be quoted for each of the 5,000 units?

Accepted Answer

A)  $23.50 
B)  $24.50 
C)  $27.50 
D)  $34.00 
A)  $23.50 
B)  $24.50 
C)  $27.50 
D)  $34.00

Question 5

Depreciation on factory equipment is normally a relevant cost in product line decisions.

Accepted Answer

A) True 
 B)False

Question 6

What are some factors that a company must consider when deciding to raise or lower sales prices on products?

Accepted Answer

Quantitative factors include the new con

Question 7

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?

Accepted Answer

A)  maintaining a long-term relationship with suppliers 
B)  quality control is critical 
C)  utilization of idle capacity 
D)  part is critical to product 
A)  maintaining a long-term relationship with suppliers 
B)  quality control is critical 
C)  utilization of idle capacity 
D)  part is critical to product

Question 8

Kellman Corporation Kellman Corporation sells a product for $18 per unit, and the standard cost card for the product shows the following costs:
  Refer to Kellman Corporation. Assume that Kellman has sufficient idle capacity to produce the 1,000 units. If Kellman wants to increase its operating profit by $5,600, what would it charge as a per-unit selling price?

Accepted Answer

A)  $18.00 
B)  $10.00 
C)  $11.00 
D)  $16.60 
A)  $18.00 
B)  $10.00 
C)  $11.00 
D)  $16.60

Question 9

In evaluating alternative courses of action, a manager should select the alternative that provides the highest incremental benefit to the company.

Accepted Answer

A) True 
 B)False

Question 10

Galveston Pipe Corporation The capital budgeting committee of the Galveston Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model. Information on the existing machine and the new model follows:
  Refer to Galveston Pipe Corporation. If the company buys the new machine and disposes of the existing machine, corporate profit over the five-year life of the new machine will be ____ than the profit that would have been generated had the existing machine been retained for five years.

Accepted Answer

A)  $150,000 lower 
B)  $170,000 lower 
C)  $230,000 lower 
D)  $150,000 higher 
A)  $150,000 lower 
B)  $170,000 lower 
C)  $230,000 lower 
D)  $150,000 higher

Question 11

In linear programming, a slack variable represents the unused portion of a resource.

Accepted Answer

A) True 
 B)False

Question 12

Costs forgone when an individual or organization chooses one option over another are

Accepted Answer

A)  budgeted costs. 
B)  sunk costs. 
C)  historical costs. 
D)  opportunity costs. 
A)  budgeted costs. 
B)  sunk costs. 
C)  historical costs. 
D)  opportunity costs.

Question 13

Thomas Company has only 25,000 hours of machine time each month to manufacture its two products. Product X has a contribution margin of $50, and Product Y has a contribution margin of $64. Product X requires 5 hours of machine time, and Product Y requires 8 hours of machine time. If Thomas Company wants to dedicate 80 percent of its machine time to the product that will provide the most income, the company will have a total contribution margin of

Accepted Answer

A)  $250,000. 
B)  $240,000. 
C)  $210,000. 
D)  $200,000. 
A)  $250,000. 
B)  $240,000. 
C)  $210,000. 
D)  $200,000.

Question 14

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called

Accepted Answer

A)  target costing. 
B)  insourcing. 
C)  outsourcing. 
D)  product harvesting. 
A)  target costing. 
B)  insourcing. 
C)  outsourcing. 
D)  product harvesting.

Question 15

Kellman Corporation Kellman Corporation sells a product for $18 per unit, and the standard cost card for the product shows the following costs:
  Refer to Kellman Corporation. Kellman received a special order for 1,000 units of the product. The only additional cost to Kellman would be foreign import taxes of $1 per unit. If Kellman is able to sell all of the current production domestically, what would be the minimum sales price that Kellman would consider for this special order?

Accepted Answer

A)  $18.00 
B)  $11.00 
C)  $5.40 
D)  $19.00 
A)  $18.00 
B)  $11.00 
C)  $5.40 
D)  $19.00

Question 16

Which of the following is the least likely to be a relevant item in deciding whether to replace an old machine?

Accepted Answer

A)  acquisition cost of the old machine 
B)  outlay to be made for the new machine 
C)  annual savings to be enjoyed on the new machine 
D)  life of the new machine 
A)  acquisition cost of the old machine 
B)  outlay to be made for the new machine 
C)  annual savings to be enjoyed on the new machine 
D)  life of the new machine

Question 17

Segment margin measures a segment's contribution to the coverage of indirect expenses.

Accepted Answer

A) True 
 B)False

Question 18

In linear programming, a surplus variable is associated with   constraints.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a characteristic of relevant costing information? It is

Accepted Answer

A)  associated with the decision under consideration. 
B)  significant to the decision maker. 
C)  readily quantifiable. 
D)  related to a future endeavor. 
A)  associated with the decision under consideration. 
B)  significant to the decision maker. 
C)  readily quantifiable. 
D)  related to a future endeavor.

Question 20

Brooklyn Bakers Brooklyn Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine. Information on each machine follows:
  Refer to Brooklyn Bakers. The estimated $650 salvage value of the existing machine in 10 years represents a(n)

Accepted Answer

A)  sunk cost. 
B)  opportunity cost of selling the existing machine now. 
C)  opportunity cost of keeping the existing machine for 10 years. 
D)  opportunity cost of keeping the existing machine and buying the new machine. 
A)  sunk cost. 
B)  opportunity cost of selling the existing machine now. 
C)  opportunity cost of keeping the existing machine for 10 years. 
D)  opportunity cost of keeping the existing machine and buying the new machine.

In a make or buy decision, the opportunity cost of capacity could

A company may outsource some of its production in order to focus on core competencies.

Depreciation on factory equipment is normally a relevant cost in product line decisions.

What are some factors that a company must consider when deciding to raise or lower sales prices on products?

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?

In evaluating alternative courses of action, a manager should select the alternative that provides the highest incremental benefit to the company.

In linear programming, a slack variable represents the unused portion of a resource.

Costs forgone when an individual or organization chooses one option over another are

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called

Which of the following is the least likely to be a relevant item in deciding whether to replace an old machine?

Segment margin measures a segment's contribution to the coverage of indirect expenses.

In linear programming, a surplus variable is associated with constraints.

Which of the following is not a characteristic of relevant costing information? It is

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Break-Even Point and Cost-Volume-Profit Analysis

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting, Support Department Allocations, and Transfer Pricing

Performance Measurement, Balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

Exam 10: Relevant Information for Decision Making

In a make or buy decision, the opportunity cost of capacity could

A company may outsource some of its production in order to focus on core competencies.

Depreciation on factory equipment is normally a relevant cost in product line decisions.

What are some factors that a company must consider when deciding to raise or lower sales prices on products?

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?

In evaluating alternative courses of action, a manager should select the alternative that provides the highest incremental benefit to the company.

In linear programming, a slack variable represents the unused portion of a resource.

Costs forgone when an individual or organization chooses one option over another are

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called

Which of the following is the least likely to be a relevant item in deciding whether to replace an old machine?

Segment margin measures a segment's contribution to the coverage of indirect expenses.

In linear programming, a surplus variable is associated with constraints.

Which of the following is not a characteristic of relevant costing information? It is

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Break-Even Point and Cost-Volume-Profit Analysis

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting, Support Department Allocations, and Transfer Pricing

Performance Measurement, Balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters