Question 1

The main purpose of allocating joint costs to products is to

Accepted Answer

A) assist management in setting prices for its products. 
B) assist in the annual budgetary processes. 
C) assist in determining the cost of the products involved. 
D) assist in determining which products should be added or dropped. 
A) assist management in setting prices for its products. 
B) assist in the annual budgetary processes. 
C) assist in determining the cost of the products involved. 
D) assist in determining which products should be added or dropped.

Question 2

$$\text { Use the following information for questions } 37 - 38 \text {. }$$
Eminen Music produces 60,000 blank CDs on which to record music.The CDs have the following costs:
$$\begin{array} { l l } 
\text { Direct Materials } & \$ 11,000 \
\text { Direct Labour } & 15,000 \
\text { Variable Overhead } & \mathbf { 3 } , 000 \
\text { Fixed Overhead } & 7,000
\end{array}$$
-None of Eminem's fixed overhead costs can be reduced, but another product could be made that would increase profit contribution by $4,000 if the CDs were acquired externally.If cost minimization is the major consideration and the company would prefer to buy the CDs, what is the maximum external price that Eminem would be willing to accept to acquire the 60,000 units externally?

Accepted Answer

A) $36,000 
B) $32,000 
C) $33,000 
D) $40,000 
A) $36,000 
B) $32,000 
C) $33,000 
D) $40,000

Question 3

PH Toy Company is unsure of whether to sell its product assembled or unassembled.The unit cost of the unassembled product is $30 and PH Toy Company would sell it for $65.The cost to assemble the product is estimated at $21 per unit and PH Toy Company believes the market would support a price of $85 on the assembled unit.What decision should PH Toy make?

Accepted Answer

A) Sell before assembly; the company will be better off by $1 per unit. 
B) Sell before assembly; the company will be better off by $20 per unit. 
C) Process further; the company will be better off by $29 per unit. 
D) Process further; the company will be better off by $14 per unit. 
A) Sell before assembly; the company will be better off by $1 per unit. 
B) Sell before assembly; the company will be better off by $20 per unit. 
C) Process further; the company will be better off by $29 per unit. 
D) Process further; the company will be better off by $14 per unit.

Question 4

Decision making

Accepted Answer

A) involves reviewing the results of a decision once the decision has been made. 
B) using incremental analysis focuses on the amounts which are the same among alternatives. 
C) involves management considering only financial information because accounting is presented in a financial context. 
D) always follows the same pattern, because decisions vary significantly in their scope, urgency, and importance. 
A) involves reviewing the results of a decision once the decision has been made. 
B) using incremental analysis focuses on the amounts which are the same among alternatives. 
C) involves management considering only financial information because accounting is presented in a financial context. 
D) always follows the same pattern, because decisions vary significantly in their scope, urgency, and importance.

Question 5

Which one of the following does not affect a make-or-buy decision?

Accepted Answer

A) variable manufacturing costs 
B) opportunity cost 
C) incremental revenue 
D) direct labour 
A) variable manufacturing costs 
B) opportunity cost 
C) incremental revenue 
D) direct labour

Question 6

Which of the following is a true statement about costs in incremental analysis?

Accepted Answer

A) Variable costs are always relevant. 
B) Fixed costs are never relevant. 
C) Fixed costs are always relevant. 
D) Both variable and fixed costs can be relevant. 
A) Variable costs are always relevant. 
B) Fixed costs are never relevant. 
C) Fixed costs are always relevant. 
D) Both variable and fixed costs can be relevant.

Question 7

Which of the following statements about incremental analysis is true?

Accepted Answer

A) It cannot be used if more than two alternatives are available. 
B) It considers only cost factors, not revenue. 
C) Its focus is on the past activities. 
D) It only considers factors that are different for each alternative, and only those factors that will occur in the future. 
A) It cannot be used if more than two alternatives are available. 
B) It considers only cost factors, not revenue. 
C) Its focus is on the past activities. 
D) It only considers factors that are different for each alternative, and only those factors that will occur in the future.

Question 8

What is the process of evaluating financial data that changes under alternative courses of action called?

Accepted Answer

A) incremental analysis 
B) decision-making analysis 
C) contribution margin analysis 
D) cost-benefit analysis 
A) incremental analysis 
B) decision-making analysis 
C) contribution margin analysis 
D) cost-benefit analysis

Question 9

Costs that are relevant for future decision making in a manufacturing environment include

Accepted Answer

A) only variable manufacturing costs. 
B) only fixed manufacturing costs. 
C) all manufacturing costs. 
D) only future costs that impact on the alternatives presented. 
A) only variable manufacturing costs. 
B) only fixed manufacturing costs. 
C) all manufacturing costs. 
D) only future costs that impact on the alternatives presented.

Question 10

In a decision concerning replacing equipment

Accepted Answer

A) with new equipment, the book value of the old equipment can be considered an opportunity cost. 
B) or keeping it, the salvage value of the old equipment is a sunk cost in incremental analysis. 
C) with new equipment, old equipment which is not fully depreciated should always be replaced. 
D) any trade-in allowance or cash disposal value of existing assets is relevant to the decision to retain or replace equipment. 
A) with new equipment, the book value of the old equipment can be considered an opportunity cost. 
B) or keeping it, the salvage value of the old equipment is a sunk cost in incremental analysis. 
C) with new equipment, old equipment which is not fully depreciated should always be replaced. 
D) any trade-in allowance or cash disposal value of existing assets is relevant to the decision to retain or replace equipment.

Question 11

Serene Dairy has four product lines: sour cream, ice cream, yogurt, and butter.The total costs of producing the milk base for the products is $53,000 which has been allocated based on litres of milk base used by each product.Results of July follow:   How much are total joint costs of the products?

Accepted Answer

A) $33,000 
B) $13,500 
C) $53,000 
D) $12,500 
A) $33,000 
B) $13,500 
C) $53,000 
D) $12,500

Question 12

Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: $$\begin{array} { l c } 
\text { Direct materials and direct labour } & \$ 11.00 \
\text { Variable overhead } & 3.00 \
\text { Fixed overhead } & \underline { 8.00} \
\text { Total } & \$ \underline { 2 2 . 0 0 }
\end{array}$$ The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?

Accepted Answer

A) $24.00 
B) $14.00 
C) $11.00 
D) $19.00 
A) $24.00 
B) $14.00 
C) $11.00 
D) $19.00

Question 13

Max Company uses 10,000 units of Part A in producing its products.A supplier offers to make Part A for $7.Max Company has relevant costs of $8 a unit to manufacture Part A.If there is excess capacity, the opportunity cost of buying Part A from the supplier is

Accepted Answer

A) $0. 
B) $10,000. 
C) $70,000. 
D) $80,000. 
A) $0. 
B) $10,000. 
C) $70,000. 
D) $80,000.

Question 14

Namov Company has old inventory on hand that cost $12,000.Its scrap value is $16,000.The inventory could be sold for $38,000 if manufactured further at an additional cost of $12,000.What should Namov do?

Accepted Answer

A) Sell the inventory for $16,000 scrap value. 
B) Dispose of the inventory to avoid any further decline in value. 
C) Hold the inventory at its $12,000 cost. 
D) Manufacture further and sell it for $38,000. 
A) Sell the inventory for $16,000 scrap value. 
B) Dispose of the inventory to avoid any further decline in value. 
C) Hold the inventory at its $12,000 cost. 
D) Manufacture further and sell it for $38,000.

Question 15

Which steps do accountants mostly contribute to in the decision-making process?

Accepted Answer

A) Identifying the problem and then assigning responsibility. 
B) Determining and evaluating possible courses of action and then reviewing the results of the decision. 
C) Determining and evaluating possible courses of action, and then making a decision. 
D) Making a decision and then reviewing the results of that decision. 
A) Identifying the problem and then assigning responsibility. 
B) Determining and evaluating possible courses of action and then reviewing the results of the decision. 
C) Determining and evaluating possible courses of action, and then making a decision. 
D) Making a decision and then reviewing the results of that decision.

Question 16

A company is considering replacing old equipment with new equipment.Which of the following is a relevant cost for incremental analysis?

Accepted Answer

A) total accumulated depreciation of the old equipment 
B) cost of the old equipment 
C) annual operating cost of the new equipment 
D) book value of the old equipment 
A) total accumulated depreciation of the old equipment 
B) cost of the old equipment 
C) annual operating cost of the new equipment 
D) book value of the old equipment

Question 17

A company should

Accepted Answer

A) eliminate any segment in which the contribution margin is less than the fixed costs that are unavoidable. 
B) eliminate an unprofitable product line as it will always increase the total profits of a company. 
C) eliminate an unprofitable product as fixed expenses allocated to the eliminated segment will likely be eliminated. 
D) identify the relevant costs in deciding whether to eliminate an unprofitable segment. 
A) eliminate any segment in which the contribution margin is less than the fixed costs that are unavoidable. 
B) eliminate an unprofitable product line as it will always increase the total profits of a company. 
C) eliminate an unprofitable product as fixed expenses allocated to the eliminated segment will likely be eliminated. 
D) identify the relevant costs in deciding whether to eliminate an unprofitable segment.

Question 18

When a company does not have sufficient capacity to fill an order for less than the current selling price, what additional factor must be taken into consideration?

Accepted Answer

A) The decision process is the same whether there is sufficient capacity or not. 
B) How will the lack of capacity affect the quality of the product? 
C) Can resources be transferred from producing product to sell at the current price to producing product at the special price? 
D) opportunity costs 
A) The decision process is the same whether there is sufficient capacity or not. 
B) How will the lack of capacity affect the quality of the product? 
C) Can resources be transferred from producing product to sell at the current price to producing product at the special price? 
D) opportunity costs

Question 19

When making a decision to accept a special order, management must consider

Accepted Answer

A) the impact that additional manufacturing time will have on unit costs of its current products. 
B) whether the purchaser will accept additional high costs of a special order. 
C) whether a lower price will convince the purchaser to become a regular customer. 
D) whether capacity exists to meet the demand of the order. 
A) the impact that additional manufacturing time will have on unit costs of its current products. 
B) whether the purchaser will accept additional high costs of a special order. 
C) whether a lower price will convince the purchaser to become a regular customer. 
D) whether capacity exists to meet the demand of the order.

Question 20

Which one of the following is a true statement about incremental analysis?

Accepted Answer

A) It is another name for capital budgeting. 
B) It is the same as CVP analysis. 
C) It is used primarily for long-term planning. 
D) It focuses on decisions that involve a choice among alternative courses of action. 
A) It is another name for capital budgeting. 
B) It is the same as CVP analysis. 
C) It is used primarily for long-term planning. 
D) It focuses on decisions that involve a choice among alternative courses of action.

The main purpose of allocating joint costs to products is to

Decision making

Which one of the following does not affect a make-or-buy decision?

Which of the following is a true statement about costs in incremental analysis?

Which of the following statements about incremental analysis is true?

What is the process of evaluating financial data that changes under alternative courses of action called?

Costs that are relevant for future decision making in a manufacturing environment include

In a decision concerning replacing equipment

Serene Dairy has four product lines: sour cream, ice cream, yogurt, and butter.The total costs of producing the milk base for the products is $53,000 which has been allocated based on litres of milk base used by each product.Results of July follow: How much are total joint costs of the products?

Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: Direct materials and direct labour \ 11.00 Variable overhead 3.00 Fixed overhead Total \ The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?

Max Company uses 10,000 units of Part A in producing its products.A supplier offers to make Part A for $7.Max Company has relevant costs of $8 a unit to manufacture Part A.If there is excess capacity, the opportunity cost of buying Part A from the supplier is

Namov Company has old inventory on hand that cost $12,000.Its scrap value is $16,000.The inventory could be sold for $38,000 if manufactured further at an additional cost of $12,000.What should Namov do?

Which steps do accountants mostly contribute to in the decision-making process?

A company is considering replacing old equipment with new equipment.Which of the following is a relevant cost for incremental analysis?

A company should

When a company does not have sufficient capacity to fill an order for less than the current selling price, what additional factor must be taken into consideration?

When making a decision to accept a special order, management must consider

Which one of the following is a true statement about incremental analysis?

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

The main purpose of allocating joint costs to products is to

Decision making

Which one of the following does not affect a make-or-buy decision?

Which of the following is a true statement about costs in incremental analysis?

Which of the following statements about incremental analysis is true?

What is the process of evaluating financial data that changes under alternative courses of action called?

Costs that are relevant for future decision making in a manufacturing environment include

In a decision concerning replacing equipment

Serene Dairy has four product lines: sour cream, ice cream, yogurt, and butter.The total costs of producing the milk base for the products is $53,000 which has been allocated based on litres of milk base used by each product.Results of July follow: How much are total joint costs of the products?

Truckel, Inc.currently manufactures a wicket as its main product.The costs per unit are as follows: Direct materials and direct labour \ 11.00 Variable overhead 3.00 Fixed overhead Total \ The fixed overhead is an allocated common cost.How much is the relevant cost of the wicket?

Max Company uses 10,000 units of Part A in producing its products.A supplier offers to make Part A for $7.Max Company has relevant costs of $8 a unit to manufacture Part A.If there is excess capacity, the opportunity cost of buying Part A from the supplier is

Namov Company has old inventory on hand that cost $12,000.Its scrap value is $16,000.The inventory could be sold for $38,000 if manufactured further at an additional cost of $12,000.What should Namov do?

Which steps do accountants mostly contribute to in the decision-making process?

A company is considering replacing old equipment with new equipment.Which of the following is a relevant cost for incremental analysis?

A company should

When a company does not have sufficient capacity to fill an order for less than the current selling price, what additional factor must be taken into consideration?

When making a decision to accept a special order, management must consider

Which one of the following is a true statement about incremental analysis?

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