Use the following information for questions Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: \[\begin{array} { l l } \text { Direct materials } & \$ 8,400 \\ \text { Direct labor } & 11,250 \\ \text { Variable overhead } & 12,600 \\ \text { Fixed overhead } & 16,200 \end{array}\] An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. -If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600.The increase (decrease) in net income from accepting the offer would be

A) $150. B) $7,350. C) $(150). D) $(3,600). A) $150. B) $7,350. C) $(150). D) $(3,600).

Sala Co.is contemplating the replacement of an old machine with a new one.The following information has been gathered: $\begin{array}{lrr}&\text { Old Machine }&\text { New Machine }\\ \text { Price } & \$ 300,000 & \$ 600,000 \\ \text { Accumulated Depreciation } & 90,000 & -0- \\ \text { Remaining useful life } & 10 \text { years } & -0- \\ \text { Useful life } & -0- & 10 \text { years } \\ \text { Annual operating costs } & \$ 240,000 & \$ 180,600 \end{array}$ If the old machine is replaced, it can be sold for $24,000. Which of the following amounts is a sunk cost?

A) $240,000 B) $180,600 C) $600,000 D) $210,000 A) $240,000 B) $180,600 C) $600,000 D) $210,000

Use the following information for questions Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: \[\begin{array} { l l } \text { Direct materials } & \$ 8,400 \\ \text { Direct labor } & 11,250 \\ \text { Variable overhead } & 12,600 \\ \text { Fixed overhead } & 16,200 \end{array}\] An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. -If Clemente accepts the offer, by how much will net income increase (decrease)?

A) $3,750 B) $19,950 C) $(8,850) D) $(2,850) A) $3,750 B) $19,950 C) $(8,850) D) $(2,850)

Use the following information for questions Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected: $\begin{array}{lrr}&\text { Old Equipment }&\text { New Equipment }\\ \text { Purchase price } & \$ 225,000 & \$ 375,000 \\ \text { Accumulated depreciation } & 90,000 & -0- \\ \text { Annual operating costs } & 300,000 & 240,000 \end{array}$ If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years. -What is the net cost of the new equipment?

A) $375,000 B) $315,000 C) $150,000 D) $75,000 A) $375,000 B) $315,000 C) $150,000 D) $75,000

A company is considering the following alternatives: \[\begin{array} { l c c } & \text { Alternative 1 } & \text { Alternative 2 } \\ \text { Revenues } & \$ 120,000 & \$ 120,000 \\ \text { Variable costs } & 60,000 & 70,000 \\ \text { Fixed costs } & 35,000 & 35,000 \end{array}\] Which of the following are relevant in choosing between the alternatives?

A) Variable costs B) Revenues C) Fixed costs D) Variable costs and fixed costs A) Variable costs B) Revenues C) Fixed costs D) Variable costs and fixed costs

Use the following information for questions Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: \[\begin{array} { l l } \text { Direct materials } & \$ 8,400 \\ \text { Direct labor } & 11,250 \\ \text { Variable overhead } & 12,600 \\ \text { Fixed overhead } & 16,200 \end{array}\] An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. -If Clemente could avoid $3,000 of fixed overhead by accepting the offer, net income would increase (decrease) by

A) $750. B) $(5,850). C) $(3,150). D) $6,750. A) $750. B) $(5,850). C) $(3,150). D) $6,750.

A) should be initially recorded as an asset. B) is the cost of a new product proposal. C) is the potential benefit that may be obtained by following an alternative course of action. D) is classified as manufacturing overhead. A) should be initially recorded as an asset. B) is the cost of a new product proposal. C) is the potential benefit that may be obtained by following an alternative course of action. D) is classified as manufacturing overhead.

Exam 7: Fraud, Internal Control, and Cash

Use the following information for questions Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials \ 8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. -If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600.The increase (decrease) in net income from accepting the offer would be

(Multiple Choice)

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Question 21

Sala Co.is contemplating the replacement of an old machine with a new one.The following information has been gathered: Old Machine New Machine Price \ 300,000 \ 600,000 Accumulated Depreciation 90,000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs \ 240,000 \ 180,600 If the old machine is replaced, it can be sold for $24,000. Which of the following amounts is a sunk cost?

(Multiple Choice)

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Question 22

Moreland Clean Company spent $8,000 to produce Product 89, which can be sold as is for $10,000, or processed further incurring additional costs of $3,000 and then be sold for $14,000.Which amounts are relevant to the decision about Product 89?

(Multiple Choice)

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Question 23

Use the following information for questions Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials \ 8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. -If Clemente accepts the offer, by how much will net income increase (decrease)?

(Multiple Choice)

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Question 24

During 2016, it cost Westa, Inc.$18 per unit to produce part T5.During 2017, it has increased to $21 per unit.In 2017, Southside Company has offered to provide Part T5 for $16 per unit to Westa.As it pertains to the make-or-buy decision, which statement is true?

(Multiple Choice)

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Question 25

Relevant costs are always

(Multiple Choice)

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Question 26

Use the following information for questions Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price \ 225,000 \ 375,000 Accumulated depreciation 90,000 -0- Annual operating costs 300,000 240,000 If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years. -What is the net cost of the new equipment?

(Multiple Choice)

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Question 27

A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues \ 120,000 \ 120,000 Variable costs 60,000 70,000 Fixed costs 35,000 35,000 Which of the following are relevant in choosing between the alternatives?

(Multiple Choice)

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Question 28

An incremental make-or-buy decision depends solely on which alternative is the lowest cost alternative.

(True/False)

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Question 29

A cost that cannot be changed by any present or future decision is a(n)

(Multiple Choice)

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Question 30

Use the following information for questions Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials \ 8,400 Direct labor 11,250 Variable overhead 12,600 Fixed overhead 16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. -If Clemente could avoid $3,000 of fixed overhead by accepting the offer, net income would increase (decrease) by

(Multiple Choice)

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Question 31

The basic decision rule in a sell or process further decision is: process further if the incremental revenue from processing exceeds the incremental processing costs.

(True/False)

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Question 32

An opportunity cost is the potential benefit obtained by using resources in an alternative course of action.

(True/False)

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Question 33

When deciding whether or not to replace old equipment with new equipment, the overriding consideration is the

(Multiple Choice)

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Question 34

Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber.A condensed segmented income statement for a recent period follows: $\begin{array}{lrrrr}&\text { Wood }&\text { Aluminum }&\text { Hard Rubber }&\text { Total }\\\text { Sales } & \$ 500,000 & \$ 200,000 & \$ 65,000 & \$ 765,000 \\\text { Variable expenses } & 325,000 & 140,000 & 58,000 & 523,000 \\\text { Contribution margin } & 175,000 & 60,000 & 7,000 & 242,000 \\\text { Fixed expenses } & 75,000 & 35,000 & 22,000 & 132,000 \\\text { Net income (loss) }&\$100,000&\$25,000&\$(15,000)&\$110,000\end{array}$ Assume none of the fixed expenses for the hard rubber line are avoidable.What will be total net income if the line is dropped?

(Multiple Choice)

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Question 35

Martin Company incurred the following costs for 70,000 units: Variable costs $\quad\$ 420,000$ Fixed costs $\quad 392,000$ Martin has received a special order from a foreign company for 3,000 units.There is sufficient capacity to fill the order without jeopardizing regular sales.Filling the order will require spending an additional $6,300 for shipping. If Martin wants to break even on the order, what should the unit sales price be?

(Multiple Choice)

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Question 36

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

(Multiple Choice)

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Question 37

An opportunity cost

(Multiple Choice)

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Question 38

The point in the production process when joint products are readily identifiable is the

(Multiple Choice)

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Question 39

The cash disposal value of old equipment is considered to be a (an)

(Multiple Choice)

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Question 40

Moreland Clean Company spent $8,000 to produce Product 89, which can be sold as is for $10,000, or processed further incurring additional costs of $3,000 and then be sold for $14,000.Which amounts are relevant to the decision about Product 89?

During 2016, it cost Westa, Inc.$18 per unit to produce part T5.During 2017, it has increased to $21 per unit.In 2017, Southside Company has offered to provide Part T5 for $16 per unit to Westa.As it pertains to the make-or-buy decision, which statement is true?

Relevant costs are always

A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues \ 120,000 \ 120,000 Variable costs 60,000 70,000 Fixed costs 35,000 35,000 Which of the following are relevant in choosing between the alternatives?

An incremental make-or-buy decision depends solely on which alternative is the lowest cost alternative.

A cost that cannot be changed by any present or future decision is a(n)

The basic decision rule in a sell or process further decision is: process further if the incremental revenue from processing exceeds the incremental processing costs.

An opportunity cost is the potential benefit obtained by using resources in an alternative course of action.

When deciding whether or not to replace old equipment with new equipment, the overriding consideration is the

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

An opportunity cost

The point in the production process when joint products are readily identifiable is the

The cash disposal value of old equipment is considered to be a (an)

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

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