Question 1

Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?

Accepted Answer

A) Unit variable costs will increase. 
B) Fixed costs will not be relevant. 
C) Both variable and fixed costs will be relevant. 
D) The company should accept the order. 
A) Unit variable costs will increase. 
B) Fixed costs will not be relevant. 
C) Both variable and fixed costs will be relevant. 
D) The company should accept the order. C

Question 2

During 2019, it cost Westa, Inc.$12 per unit to produce Part T5.During 2020, it has increased to $14 per unit.In 2020, Southside Company has offered to provide Part T5 for $9 per unit to Westa.As it pertains to the make-or-buy decision, which statement is true?

Accepted Answer

A) Differential costs are $5 per unit. 
B) Incremental costs are $3 per unit. 
C) Net relevant costs are $3 per unit. 
D) Incremental revenues are $2 per unit. 
A) Differential costs are $5 per unit. 
B) Incremental costs are $3 per unit. 
C) Net relevant costs are $3 per unit. 
D) Incremental revenues are $2 per unit. A

Question 3

It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30.A buyer in Mexico offers to purchase 3,000 units at $18 each.Lannon has excess capacity and can handle the additional production.What effect will acceptance of the offer have on net income?

Accepted Answer

A) decrease $4,000 
B) increase $4,000 
C) increase $54,000 
D) increase $12,000 
A) decrease $4,000 
B) increase $4,000 
C) increase $54,000 
D) increase $12,000 D

Question 4

Which statement is true about relevant costs in incremental analysis?

Accepted Answer

A) All costs are relevant if they change between alternatives. 
B) Only fixed costs are relevant. 
C) Only variable costs are relevant. 
D) Relevant costs should be ignored. 
A) All costs are relevant if they change between alternatives. 
B) Only fixed costs are relevant. 
C) Only variable costs are relevant. 
D) Relevant costs should be ignored.

Question 5

Market Makeup produces face cream.Each bottle of face cream costs $10 to produce and can be sold for $13.The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each.Market Makeup could sell the sunscreen bottles for $23 each.What should Market Makeup do?

Accepted Answer

A) Face cream must be further processed because its profit is $9 each. 
B) Face cream must not be further processed because costs increase more than revenue. 
C) Face cream must not be further processed because it decreases profit by $1 each. 
D) Face cream must be further processed because it increases profit by $3 each. 
A) Face cream must be further processed because its profit is $9 each. 
B) Face cream must not be further processed because costs increase more than revenue. 
C) Face cream must not be further processed because it decreases profit by $1 each. 
D) Face cream must be further processed because it increases profit by $3 each.

Question 6

Coggin Company gathered the following data about the three products that it produces: $\begin{array}{llll}
&\text { Estimated Sales }\
\text { Present } & \text { Value before } & \text { Additional } & \text { Estimated Sales }\
\underline{\text { Product }} &\underline{\text { Processing} } &\underline{\text { Processina Costs }} &\underline{ \text { if Processed Further }}\
\mathrm{A} & \$ 9,000 & \$ 6,000 & \$ 16,000 \
\mathrm{~B} & 15,000 & 5,000 & 18,000 \
\mathrm{C} & 11,000 & 8,000 & 16,000
\end{array}$
 Which of the products should be processed further?

Accepted Answer

A) Product A 
B) Product B 
C) Product C 
D) all three products 
A) Product A 
B) Product B 
C) Product C 
D) all three products

Question 7

Walton, Inc.is unsure of whether to sell its product assembled or unassembled.The unit cost of the unassembled product is $16, while the cost of assembling each unit is estimated at $17.Unassembled units can be sold for $55, while assembled units could be sold for $71 per unit.What decision should Walton make?

Accepted Answer

A) Sell before assembly; the company will save $1 per unit. 
B) Sell before assembly; the company will save $15 per unit. 
C) Process further; the company will save $1 per unit. 
D) Process further; the company will save $16 per unit. 
A) Sell before assembly; the company will save $1 per unit. 
B) Sell before assembly; the company will save $15 per unit. 
C) Process further; the company will save $1 per unit. 
D) Process further; the company will save $16 per unit.

Question 8

Excess capacity decisions for management involve

Accepted Answer

A) decreasing sales prices to stimulate demand. 
B) accepting special orders. 
C) outsourcing some products to specialist manufacturers. 
D) mixing production to reduce variable costs. 
A) decreasing sales prices to stimulate demand. 
B) accepting special orders. 
C) outsourcing some products to specialist manufacturers. 
D) mixing production to reduce variable costs.

Question 9

For which of the following decisions is incremental analysis not appropriate?

Accepted Answer

A) elimination of an unprofitable segment 
B) determining cost behaviour 
C) a make-or-buy decision 
D) an allocation of limited resource decision 
A) elimination of an unprofitable segment 
B) determining cost behaviour 
C) a make-or-buy decision 
D) an allocation of limited resource decision

Question 10

Chapman Company manufactures widgets.Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $60,000 for 100,000 units.Chapman is currently making these components in its own factory.The following costs are associated with this part of the process when 100,000 units are produced: $\begin{array} { l l } 
\text { Direct material } & \$ 23,000 \
\text { Direct labour } & 22,000 \
\text { Manufacturing overhead } & \underline { 3 0 , 0 0 0 } \
\text { Tatal } &\underline {  \$ 75,000}
\end{array}$ The manufacturing overhead consists of $12,000 of costs that will be eliminated if the components are no longer produced by Chapman.From Chapman's point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

Accepted Answer

A) $15,000 incremental savings 
B) $3,000 incremental cost 
C) $3,000 incremental savings 
D) $15,000 incremental cost 
A) $15,000 incremental savings 
B) $3,000 incremental cost 
C) $3,000 incremental savings 
D) $15,000 incremental cost

Question 11

Argus Company anticipates that other sales will be affected by the acceptance of a special order.What should the company do?

Accepted Answer

A) Reject the order. 
B) Consider the opportunity cost of lost sales in the incremental analysis. 
C) Accept the order. 
D) Accept the order if the plant is below capacity. 
A) Reject the order. 
B) Consider the opportunity cost of lost sales in the incremental analysis. 
C) Accept the order. 
D) Accept the order if the plant is below capacity.

Question 12

Which statement is true concerning the decision rule on whether to make or buy?

Accepted Answer

A) The company should buy if the cost of buying is less than the cost of producing. 
B) The company should buy if the incremental revenue exceeds the incremental costs. 
C) The company should buy as long as total revenue exceeds present revenues. 
D) The company should buy assuming no additional fixed costs are incurred. 
A) The company should buy if the cost of buying is less than the cost of producing. 
B) The company should buy if the incremental revenue exceeds the incremental costs. 
C) The company should buy as long as total revenue exceeds present revenues. 
D) The company should buy assuming no additional fixed costs are incurred.

Question 13

Litto Fray's produces corn chips.The cost of one batch is below: $$\begin{array} { l l } 
\text { Direct materials } & \$  18.00\
\text { Direct labour } & 13.00 \
\text { Variable overhead } & 12.00 \
\text { Fixed overhead } & 14.00
\end{array}$$ An outside supplier has offered to produce the corn chips for $26 per batch.How much will Litto Fray save if it accepts the offer?

Accepted Answer

A) $2.00 per batch 
B) $17.00 per batch 
C) $31.00 per batch 
D) $6.00 per batch 
A) $2.00 per batch 
B) $17.00 per batch 
C) $31.00 per batch 
D) $6.00 per batch

Question 14

Seran Company has contacted Truckel Inc.with an offer to sell it 5,000 of the wickets for $18.00 each.If Truckel makes the wickets, variable costs are $11 per unit.Fixed costs are $12 per unit however $5 per unit is avoidable.Should Truckel make or buy the wickets? What are the savings of this choice?

Accepted Answer

A) Buy; savings = $25,000 
B) Buy; savings = $10,000 
C) Make; savings = $20,000 
D) Make; savings = $10,000 
A) Buy; savings = $25,000 
B) Buy; savings = $10,000 
C) Make; savings = $20,000 
D) Make; savings = $10,000

Question 15

A factory is operating at less than 100% capacity.Potential additional business will not use up the remainder of the plant capacity.Given the following list of costs, which one should be ignored in a decision to produce additional units of product?

Accepted Answer

A) variable selling expenses 
B) fixed factory overhead 
C) direct labour 
D) contribution margin of additional units 
A) variable selling expenses 
B) fixed factory overhead 
C) direct labour 
D) contribution margin of additional units

Question 16

When management has excess capacity available to it in the short run, which of the following would be the best path to follow?

Accepted Answer

A) Consider ways to reduce its fixed costs. 
B) Consider accepting special orders. 
C) Consider outsourcing certain products. 
D) Consider mixing its product offerings in a new way. 
A) Consider ways to reduce its fixed costs. 
B) Consider accepting special orders. 
C) Consider outsourcing certain products. 
D) Consider mixing its product offerings in a new way.

Question 17

Use the following information for questions 
Hermantic, Inc.can produce 100 units of a component part with the following costs:
 $$\begin{array} { l c } 
\text { Direct Materials } & \$ 30,000 \
\text { Direct Labour } & 13,000 \
\text { Variable Overhead } & 32,000 \
\text { Fixed Overhead } & \mathbf { 2 2 , 0 0 0 }
\end{array}$$
-If Hermantic, Inc.can purchase the component externally for $88,000 and only $8,000 of the fixed costs can be avoided, what is the correct "make-or-buy decision"?

Accepted Answer

A) Make and save $1,000. 
B) Buy and save $1,000. 
C) Make and save $5,000. 
D) Buy and save $13,000. 
A) Make and save $1,000. 
B) Buy and save $1,000. 
C) Make and save $5,000. 
D) Buy and save $13,000.

Question 18

What is the nature of a sell or process further decision?

Accepted Answer

A) It is an incremental revenue decision. 
B) It is an incremental cost decision. 
C) It is both an incremental revenue and incremental cost decision. 
D) It is neither incremental revenue nor incremental cost. 
A) It is an incremental revenue decision. 
B) It is an incremental cost decision. 
C) It is both an incremental revenue and incremental cost decision. 
D) It is neither incremental revenue nor incremental cost.

Question 19

Meow Cat Toys utilizes Lincoln Fabrics by purchasing the fabric to cover toy mice for its mouse toy division.As it pertains to Lincoln Fabrics, what decision situation does this create?

Accepted Answer

A) make-or-buy 
B) sell or process further 
C) relevant costing 
D) budgeting 
A) make-or-buy 
B) sell or process further 
C) relevant costing 
D) budgeting

Question 20

Who prepares relevant revenue and cost data for the decision-making process?

Accepted Answer

A) department heads 
B) the controller 
C) management accountants 
D) factory supervisors 
A) department heads 
B) the controller 
C) management accountants 
D) factory supervisors

Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?

During 2019, it cost Westa, Inc.$12 per unit to produce Part T5.During 2020, it has increased to $14 per unit.In 2020, Southside Company has offered to provide Part T5 for $9 per unit to Westa.As it pertains to the make-or-buy decision, which statement is true?

Which statement is true about relevant costs in incremental analysis?

Market Makeup produces face cream.Each bottle of face cream costs $10 to produce and can be sold for $13.The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each.Market Makeup could sell the sunscreen bottles for $23 each.What should Market Makeup do?

Coggin Company gathered the following data about the three products that it produces: Estimated Sales Present Value before Additional Estimated Sales \ 9,000 \ 6,000 \ 16,000 15,000 5,000 18,000 11,000 8,000 16,000 Which of the products should be processed further?

Excess capacity decisions for management involve

For which of the following decisions is incremental analysis not appropriate?

Argus Company anticipates that other sales will be affected by the acceptance of a special order.What should the company do?

Which statement is true concerning the decision rule on whether to make or buy?

Litto Fray's produces corn chips.The cost of one batch is below: Direct materials \ 18.00 Direct labour 13.00 Variable overhead 12.00 Fixed overhead 14.00 An outside supplier has offered to produce the corn chips for $26 per batch.How much will Litto Fray save if it accepts the offer?

A factory is operating at less than 100% capacity.Potential additional business will not use up the remainder of the plant capacity.Given the following list of costs, which one should be ignored in a decision to produce additional units of product?

When management has excess capacity available to it in the short run, which of the following would be the best path to follow?

What is the nature of a sell or process further decision?

Meow Cat Toys utilizes Lincoln Fabrics by purchasing the fabric to cover toy mice for its mouse toy division.As it pertains to Lincoln Fabrics, what decision situation does this create?

Who prepares relevant revenue and cost data for the decision-making process?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 7: Incremental Analysis

Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?

During 2019, it cost Westa, Inc.$12 per unit to produce Part T5.During 2020, it has increased to $14 per unit.In 2020, Southside Company has offered to provide Part T5 for $9 per unit to Westa.As it pertains to the make-or-buy decision, which statement is true?

Which statement is true about relevant costs in incremental analysis?

Market Makeup produces face cream.Each bottle of face cream costs $10 to produce and can be sold for $13.The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each.Market Makeup could sell the sunscreen bottles for $23 each.What should Market Makeup do?

Coggin Company gathered the following data about the three products that it produces: Estimated Sales Present Value before Additional Estimated Sales \ 9,000 \ 6,000 \ 16,000 15,000 5,000 18,000 11,000 8,000 16,000 Which of the products should be processed further?

Excess capacity decisions for management involve

For which of the following decisions is incremental analysis not appropriate?

Argus Company anticipates that other sales will be affected by the acceptance of a special order.What should the company do?

Which statement is true concerning the decision rule on whether to make or buy?

Litto Fray's produces corn chips.The cost of one batch is below: Direct materials \ 18.00 Direct labour 13.00 Variable overhead 12.00 Fixed overhead 14.00 An outside supplier has offered to produce the corn chips for $26 per batch.How much will Litto Fray save if it accepts the offer?

A factory is operating at less than 100% capacity.Potential additional business will not use up the remainder of the plant capacity.Given the following list of costs, which one should be ignored in a decision to produce additional units of product?

When management has excess capacity available to it in the short run, which of the following would be the best path to follow?

What is the nature of a sell or process further decision?

Meow Cat Toys utilizes Lincoln Fabrics by purchasing the fabric to cover toy mice for its mouse toy division.As it pertains to Lincoln Fabrics, what decision situation does this create?

Who prepares relevant revenue and cost data for the decision-making process?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters