Question 1

A cost that will not be affected by later decisions is termed as sunk cost.

Accepted Answer

A) True 
 B)False

Question 2

When choosing whether or not to replace an equipment, the analysis normally focuses on the costs of continuing to use the old equipment versus replacing the equipment.

Accepted Answer

A) True 
 B)False

Question 3

In using the variable cost concept of applying the cost-plus approach to product pricing, variable manufacturing costs and variable selling and administrative expenses must be covered by the markup.

Accepted Answer

A) True 
 B)False

Question 4

What pricing method is most likely to be used if there are several providers in the same market and there is sufficient demand for the product?

Accepted Answer

A)  Demand-based method 
B)  Total cost method 
C)  Cost-plus method 
D)  Competition-based method 
A)  Demand-based method 
B)  Total cost method 
C)  Cost-plus method 
D)  Competition-based method

Question 5

In using the variable cost concept of applying the cost-plus approach to product pricing, fixed manufacturing costs and fixed selling and administrative expenses must be covered by the markup.

Accepted Answer

A) True 
 B)False

Question 6

Dinkins Inc.is considering disposing of a machine with a book value of $50,000 and an estimated remaining life of five years.The old machine can be sold for $15,000.A new machine with a purchase price of $150,000 is being considered as a replacement.It will have a useful life of five years and no residual value.It is estimated that variable manufacturing costs will be reduced from $70,000 to $45,000 if the new machine is purchased.The net differential increase or decrease in cost for the entire five years for the new equipment is:

Accepted Answer

A)  $10,000 increase. 
B)  $25,000 decrease. 
C)  $10,000 decrease. 
D)  $25,000 increase. 
A)  $10,000 increase. 
B)  $25,000 decrease. 
C)  $10,000 decrease. 
D)  $25,000 increase.

Question 7

When choosing whether or not to replace a fixed asset, management will consider the price at which the asset can be sold.

Accepted Answer

A) True 
 B)False

Question 8

Differential revenue is the amount of income that would result from the best available alternative for the proposed use of cash.

Accepted Answer

A) True 
 B)False

Question 9

Tidewater Company uses the product cost concept of applying the cost-plus approach to product pricing.The cost and expenses of producing and selling 50,000 units of Product K are as follows:
​ $\begin{array}{lr}
\text { Variable costs: } & \
\text { Direct materials } & \$ 5.00 \
\text { Direct labor } & 8.50 \
\text { Factory overhead } & 2.50 \
\text { Selling and administrative expenses } & 1.00 \
\text { Total } & \$ 17.00\\\text { Fixed costs: }\
\text { Factory overhead }&\$ 50,000 \
\text { Selling and administrative expenses }&34,000
\end{array}$ ​
Tidewater desires a profit equal to a 10% rate of return on invested assets of $1,285,000.
(a)Determine the amount of desired profit from the production and sale of Product K.
(b)Determine the total manufacturing costs and the cost amount per unit for the production and sale of 50,000 units of Product K.
(c)Determine the markup percentage for Product K.
(d)Determine the selling price of Product K.

Accepted Answer

The answer of Tidewater Company uses the product cost concept...

Question 10

In using the total cost concept of applying the cost-plus approach to product pricing, only profit is covered in the markup.

Accepted Answer

A) True 
 B)False

Question 11

In using the product cost concept of applying the cost-plus approach to product pricing, selling expenses, administrative expenses, and profit are covered in the markup.

Accepted Answer

A) True 
 B)False

Question 12

What is a production constraint?

Accepted Answer

A)  The point in the manufacturing process where the demand for the company's products exceeds its ability to produce the products 
B)  A manufacturing strategy used to reduce production cost by eliminating waste of inventory 
C)  A manufacturing strategy that focuses on increasing the influence of constraints on production processes 
D)  The point in the manufacturing process where total variable costs and total fixed costs equals total revenues 
A)  The point in the manufacturing process where the demand for the company's products exceeds its ability to produce the products 
B)  A manufacturing strategy used to reduce production cost by eliminating waste of inventory 
C)  A manufacturing strategy that focuses on increasing the influence of constraints on production processes 
D)  The point in the manufacturing process where total variable costs and total fixed costs equals total revenues

Question 13

The product cost concept includes all manufacturing costs in the cost amount to which the markup is added to determine product price.

Accepted Answer

A) True 
 B)False

Question 14

Green Co.incurs a cost of $15 per pound to produce Product X, which it sells for $26 per pound.The company can further process Product X to produce Product Y.Product Y would sell for $30 per pound and would require an additional cost of $10 per pound to be produced.The differential revenue of producing Product Y is _____.

Accepted Answer

A)  $4 per pound 
B)  $30 per pound 
C)  $26 per pound 
D)  $5 per pound 
A)  $4 per pound 
B)  $30 per pound 
C)  $26 per pound 
D)  $5 per pound

Question 15

A business is considering a cash outlay of $200,000 for the purchase of land, which it could lease for $35,000 per year.If alternative investments are available that yield an 18% return, the opportunity cost of the purchase of the land is:

Accepted Answer

A)  $35,000. 
B)  $36,000. 
C)  $1,000. 
D)  $37,000. 
A)  $35,000. 
B)  $36,000. 
C)  $1,000. 
D)  $37,000.

Question 16

In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the cost amount to which the markup is added?

Accepted Answer

A)  Total selling and administrative expenses plus desired profit 
B)  Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit 
C)  Total costs of manufacturing a product plus selling and administrative expenses 
D)  Total variable manufacturing costs, total variable selling and administrative expenses, and desired profit 
A)  Total selling and administrative expenses plus desired profit 
B)  Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit 
C)  Total costs of manufacturing a product plus selling and administrative expenses 
D)  Total variable manufacturing costs, total variable selling and administrative expenses, and desired profit

Question 17

When evaluating whether to lease or sell an equipment, book value is considered to be the cost of selling the equipment.

Accepted Answer

A) True 
 B)False

Question 18

Hill Co.can further process Product O to produce Product P.Product O is currently selling for $60 per pound and costs $42 per pound to produce.Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce.The differential cost of producing Product P is $13 per pound.

Accepted Answer

A) True 
 B)False

Question 19

When standard costs are used in applying the cost-plus approach to product pricing, the standards should be based upon normal levels of performance.

Accepted Answer

A) True 
 B)False

Question 20

Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared to an alternative.

Accepted Answer

A) True 
 B)False

A cost that will not be affected by later decisions is termed as sunk cost.

When choosing whether or not to replace an equipment, the analysis normally focuses on the costs of continuing to use the old equipment versus replacing the equipment.

In using the variable cost concept of applying the cost-plus approach to product pricing, variable manufacturing costs and variable selling and administrative expenses must be covered by the markup.

What pricing method is most likely to be used if there are several providers in the same market and there is sufficient demand for the product?

In using the variable cost concept of applying the cost-plus approach to product pricing, fixed manufacturing costs and fixed selling and administrative expenses must be covered by the markup.

When choosing whether or not to replace a fixed asset, management will consider the price at which the asset can be sold.

Differential revenue is the amount of income that would result from the best available alternative for the proposed use of cash.

In using the total cost concept of applying the cost-plus approach to product pricing, only profit is covered in the markup.

In using the product cost concept of applying the cost-plus approach to product pricing, selling expenses, administrative expenses, and profit are covered in the markup.

What is a production constraint?

The product cost concept includes all manufacturing costs in the cost amount to which the markup is added to determine product price.

A business is considering a cash outlay of $200,000 for the purchase of land, which it could lease for $35,000 per year.If alternative investments are available that yield an 18% return, the opportunity cost of the purchase of the land is:

In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the cost amount to which the markup is added?

When evaluating whether to lease or sell an equipment, book value is considered to be the cost of selling the equipment.

When standard costs are used in applying the cost-plus approach to product pricing, the standards should be based upon normal levels of performance.

Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared to an alternative.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

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Exam 12: Differential Analysis and Product Pricing

A cost that will not be affected by later decisions is termed as sunk cost.

When choosing whether or not to replace an equipment, the analysis normally focuses on the costs of continuing to use the old equipment versus replacing the equipment.

In using the variable cost concept of applying the cost-plus approach to product pricing, variable manufacturing costs and variable selling and administrative expenses must be covered by the markup.

What pricing method is most likely to be used if there are several providers in the same market and there is sufficient demand for the product?

In using the variable cost concept of applying the cost-plus approach to product pricing, fixed manufacturing costs and fixed selling and administrative expenses must be covered by the markup.

When choosing whether or not to replace a fixed asset, management will consider the price at which the asset can be sold.

Differential revenue is the amount of income that would result from the best available alternative for the proposed use of cash.

In using the total cost concept of applying the cost-plus approach to product pricing, only profit is covered in the markup.

In using the product cost concept of applying the cost-plus approach to product pricing, selling expenses, administrative expenses, and profit are covered in the markup.

What is a production constraint?

The product cost concept includes all manufacturing costs in the cost amount to which the markup is added to determine product price.

A business is considering a cash outlay of $200,000 for the purchase of land, which it could lease for $35,000 per year.If alternative investments are available that yield an 18% return, the opportunity cost of the purchase of the land is:

In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the cost amount to which the markup is added?

When evaluating whether to lease or sell an equipment, book value is considered to be the cost of selling the equipment.

When standard costs are used in applying the cost-plus approach to product pricing, the standards should be based upon normal levels of performance.

Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared to an alternative.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters