Question 1

The practice of setting prices highest when the quantity demanded for the product approaches capacity is:

Accepted Answer

A)  predatory pricing. 
B)  target pricing. 
C)  peak-load pricing. 
D)  price fixing. 
A)  predatory pricing. 
B)  target pricing. 
C)  peak-load pricing. 
D)  price fixing.

Question 2

Dickson Industries has two divisions: the North Division and the South Division. Information relating to the divisions for the year just ended is as follows:
 $\begin{array}{lrr}
&\text { North}&\text { South}\
\text { Units produced and sold}&40,000&50,000\
\text {  Selling price per unit}&\$9&\$16\
\text { Variable costs per unit } & 4 & 6 \
\text { Direct fixed cost } & 148,000& 220,000\
\text { Common fixed cost } & 140,000& 140,000
\end{array}$
 
Common fixed expenses have been allocated equally to each of the two divisions.
Required:
Prepare a segmented income statement for Dickson.

Accepted Answer

The answer of Dickson Industries has two divisions: the North...

Question 3

Peak-load pricing is the practice of setting prices lowest when the quantity demanded for the product approaches the physical capacity to produce it.

Accepted Answer

A) True 
 B)False

Question 4

The alternative courses of action in a make-or-buy decision are (a) manufacture needed items internally or (b) purchase needed items externally.

Accepted Answer

A) True 
 B)False

Question 5

In the short-run, plant capacity is fixed and product choices have to be made that optimize the use of available capacity.

Accepted Answer

A) True 
 B)False

Question 6

Tara Inc. is considering using stocks of an old raw material in a special project. The special project would require all 160 kilograms of the raw material that are in stock and that originally cost the company $1,136 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $7.25 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $6.50 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $75.00 for all 160 kilograms. What is the relevant cost of the 160 kilograms of the raw material when deciding whether to proceed with the special project? (CIMA adapted)

Accepted Answer

A)  $1,040 
B)  $965 
C)  $1,136 
D)  $1,160 
A)  $1,040 
B)  $965 
C)  $1,136 
D)  $1,160

Question 7

Differential analysis involves the comparison of one or more alternative courses of action with the status quo.

Accepted Answer

A) True 
 B)False

Question 8

Xenos Inc. has 6,600 machine hours available each month. The following information on the company's three products is available:
$$\begin{array} { l r r r } 
& \text { Product X } & \text { Product Y } & \text { Product Z } \
\text { Contribution margin per unit } & \$ 20.00 & \$ 2 1 . 0 0  & \$ 1 7 . 50\
\text { Machine hours per urit } & 2 & 3 & 2
\end{array}$$
If market demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits?

Accepted Answer

A)  Product X first, product Z second, and product Y third. 
B)  Product Y first, product Z second, and product X third. 
C)  Product Y first, product X second, and product Z third. 
D)  Product Z first, product X second, and product Y third. 
A)  Product X first, product Z second, and product Y third. 
B)  Product Y first, product Z second, and product X third. 
C)  Product Y first, product X second, and product Z third. 
D)  Product Z first, product X second, and product Y third.

Question 9

The opportunity cost of making a component part in a factory with no excess capacity is the: (CMA adapted)

Accepted Answer

A)  variable manufacturing cost of the component. 
B)  fixed manufacturing cost of the component. 
C)  total manufacturing cost of the component. 
D)  net benefit foregone from the best alternative use of the capacity required. 
A)  variable manufacturing cost of the component. 
B)  fixed manufacturing cost of the component. 
C)  total manufacturing cost of the component. 
D)  net benefit foregone from the best alternative use of the capacity required.

Question 10

Which of the following costs are not considered in a differential analysis for a make-or-buy decision?

Accepted Answer

A)  Indirect materials and indirect labor if the item is manufactured internally. 
B)  Direct materials and direct labor if the item is purchased. 
C)  Variable overhead if the item is manufactured internally. 
D)  Fixed overhead that will continue if the item is purchased. 
A)  Indirect materials and indirect labor if the item is manufactured internally. 
B)  Direct materials and direct labor if the item is purchased. 
C)  Variable overhead if the item is manufactured internally. 
D)  Fixed overhead that will continue if the item is purchased.

The practice of setting prices highest when the quantity demanded for the product approaches capacity is:

Peak-load pricing is the practice of setting prices lowest when the quantity demanded for the product approaches the physical capacity to produce it.

The alternative courses of action in a make-or-buy decision are (a) manufacture needed items internally or (b) purchase needed items externally.

In the short-run, plant capacity is fixed and product choices have to be made that optimize the use of available capacity.

Differential analysis involves the comparison of one or more alternative courses of action with the status quo.

The opportunity cost of making a component part in a factory with no excess capacity is the: (CMA adapted)

Which of the following costs are not considered in a differential analysis for a make-or-buy decision?

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 4: Fundamentals of Cost Analysis for Decision Making

The practice of setting prices highest when the quantity demanded for the product approaches capacity is:

Peak-load pricing is the practice of setting prices lowest when the quantity demanded for the product approaches the physical capacity to produce it.

The alternative courses of action in a make-or-buy decision are (a) manufacture needed items internally or (b) purchase needed items externally.

In the short-run, plant capacity is fixed and product choices have to be made that optimize the use of available capacity.

Differential analysis involves the comparison of one or more alternative courses of action with the status quo.

The opportunity cost of making a component part in a factory with no excess capacity is the: (CMA adapted)

Which of the following costs are not considered in a differential analysis for a make-or-buy decision?

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters