Question 1

Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives.

Accepted Answer

A) True 
 B)False

Question 2

It is always better to sell now rather than process further because of the time value of money.

Accepted Answer

A) True 
 B)False

Question 3

If a company is operating at full capacity, the incremental costs of a special order will likely include fixed manufacturing costs.

Accepted Answer

A) True 
 B)False

Question 4

Galley Industries can produce 100 units of a necessary component part with the following costs: $\begin{array}{lr}
\text { Direct Materials } & \$ 20,000 \
\text { Direct Labor } & 9,000 \
\text { Variable Overhead } & 21,000 \
\text { Fixed Overhead } & 8,000
\end{array}$ If Galley Industries purchases the component externally, $2,000 of the fixed costs can be avoided.Below what external price for the 100 units would Galley choose to buy instead of make?

Accepted Answer

A) $50,000 
B) $56,000 
C) $44,000 
D) $52,000 
A) $50,000 
B) $56,000 
C) $44,000 
D) $52,000

Question 5

The decision rule on whether to sell or process further

Accepted Answer

A) varies from situation to situation. 
B) is process further as long as total revenue exceeds present revenues. 
C) is process further if incremental revenue from such processing exceeds incremental fixed costs. 
D) is process further if incremental revenue from such processing exceeds the incremental processing costs. 
A) varies from situation to situation. 
B) is process further as long as total revenue exceeds present revenues. 
C) is process further if incremental revenue from such processing exceeds incremental fixed costs. 
D) is process further if incremental revenue from such processing exceeds the incremental processing costs.

Question 6

If an incremental make or buy analysis indicates that it is cheaper to buy rather than make an item, management should always make the decision to choose the lowest cost alternative.

Accepted Answer

A) True 
 B)False

Question 7

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 relevant to the replacement decision?

Accepted Answer

A) $210,000 
B) $300,000 
C) $59,400 
D) $90,000 
A) $210,000 
B) $300,000 
C) $59,400 
D) $90,000

Question 8

Accounting's contribution to the decision-making process occurs in all of the following steps except to

Accepted Answer

A) identify the problem and assign responsibility. 
B) determine possible courses of action. 
C) review results of the decision. 
D) make a decision. 
A) identify the problem and assign responsibility. 
B) determine possible courses of action. 
C) review results of the decision. 
D) make a decision.

Question 9

Fornelli, Inc.can produce 100 units of a component part with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 15,000 \
\text { Direct Labor } & 6,500 \
\text { Variable Overhead } & 16,000 \
\text { Fixed Overhead } & 11,000
\end{array}$$ If Fornelli, Inc.can purchase the units externally for $40,000, by what amount will its total costs change?

Accepted Answer

A) An increase of $40,000 
B) An increase of $2,500 
C) An increase of $8,500 
D) A decrease of $11,000 
A) An increase of $40,000 
B) An increase of $2,500 
C) An increase of $8,500 
D) A decrease of $11,000

Question 10

Costs that will differ between alternatives and influence the outcome of a decision are

Accepted Answer

A) sunk costs. 
B) unavoidable costs. 
C) relevant costs. 
D) product costs. 
A) sunk costs. 
B) unavoidable costs. 
C) relevant costs. 
D) product costs.

Question 11

A revenue that differs between alternatives and makes a difference in decision-making is called a(n)

Accepted Answer

A) sales revenue. 
B) incremental revenue. 
C) unavoidable revenue. 
D) irrelevant revenue. 
A) sales revenue. 
B) incremental revenue. 
C) unavoidable revenue. 
D) irrelevant revenue.

Question 12

Internal reports that review the actual impact of decisions are prepared by

Accepted Answer

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

Question 13

Incremental analysis would be appropriate for

Accepted Answer

A) acceptance of an order at a special price. 
B) a retain or replace equipment decision. 
C) a sell or process further decision. 
D) All of these answers are correct. 
A) acceptance of an order at a special price. 
B) a retain or replace equipment decision. 
C) a sell or process further decision. 
D) All of these answers are correct.

Question 14

It costs Dryer Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit.A foreign wholesaler offers to purchase 5,000 units at $21 each.Dryer would incur special shipping costs of $2 per unit if the order were accepted.Dryer has sufficient unused capacity to produce the 5,000 units.If the special order is accepted, what will be the effect on net income?

Accepted Answer

A) $5,000 decrease 
B) $5,000 increase 
C) $15,000 increase 
D) $90,000 increase 
A) $5,000 decrease 
B) $5,000 increase 
C) $15,000 increase 
D) $90,000 increase

Question 15

What of the following would not be relevant in a make-or-buy decision?

Accepted Answer

A) Unavoidable variable costs 
B) Incremental fixed costs 
C) Opportunity costs 
D) Avoidable fixed cost 
A) Unavoidable variable costs 
B) Incremental fixed costs 
C) Opportunity costs 
D) Avoidable fixed cost

Question 16

In a make-or-buy decision, opportunity costs are

Accepted Answer

A) added to the make total cost. 
B) deducted from the make total cost. 
C) added to the buy total cost. 
D) ignored. 
A) added to the make total cost. 
B) deducted from the make total cost. 
C) added to the buy total cost. 
D) ignored.

Question 17

Use the following information for questions 
Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: $$\begin{array} { l r } 
\text { Direct materials } & \$ 55,000 \
\text { Direct labor } & 160,000 \
\text { Variable overhead } & 75,000 \
\text { Fixed overhead } & 175,000
\end{array}$$ If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable.
-If the outside supplier offers a unit price of $68, net income will increase (decrease) by

Accepted Answer

A) $(10,000). 
B) $125,000. 
C) $(50,000). 
D) $85,000. 
A) $(10,000). 
B) $125,000. 
C) $(50,000). 
D) $85,000.

Question 18

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) Variable manufacturing costs 
B) Opportunity costs 
C) Incremental revenue 
D) Direct labor 
A) Variable manufacturing costs 
B) Opportunity costs 
C) Incremental revenue 
D) Direct labor

Question 20

In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

Accepted Answer

A) True 
 B)False

Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives.

It is always better to sell now rather than process further because of the time value of money.

If a company is operating at full capacity, the incremental costs of a special order will likely include fixed manufacturing costs.

The decision rule on whether to sell or process further

If an incremental make or buy analysis indicates that it is cheaper to buy rather than make an item, management should always make the decision to choose the lowest cost alternative.

Accounting's contribution to the decision-making process occurs in all of the following steps except to

Fornelli, Inc.can produce 100 units of a component part with the following costs: Direct Materials \ 15,000 Direct Labor 6,500 Variable Overhead 16,000 Fixed Overhead 11,000 If Fornelli, Inc.can purchase the units externally for $40,000, by what amount will its total costs change?

Costs that will differ between alternatives and influence the outcome of a decision are

A revenue that differs between alternatives and makes a difference in decision-making is called a(n)

Internal reports that review the actual impact of decisions are prepared by

Incremental analysis would be appropriate for

What of the following would not be relevant in a make-or-buy decision?

In a make-or-buy decision, opportunity costs are

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

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

In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

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

Filters

Exam 7: Fraud, Internal Control, and Cash

Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives.

It is always better to sell now rather than process further because of the time value of money.

If a company is operating at full capacity, the incremental costs of a special order will likely include fixed manufacturing costs.

The decision rule on whether to sell or process further

If an incremental make or buy analysis indicates that it is cheaper to buy rather than make an item, management should always make the decision to choose the lowest cost alternative.

Accounting's contribution to the decision-making process occurs in all of the following steps except to

Fornelli, Inc.can produce 100 units of a component part with the following costs: Direct Materials \ 15,000 Direct Labor 6,500 Variable Overhead 16,000 Fixed Overhead 11,000 If Fornelli, Inc.can purchase the units externally for $40,000, by what amount will its total costs change?

Costs that will differ between alternatives and influence the outcome of a decision are

A revenue that differs between alternatives and makes a difference in decision-making is called a(n)

Internal reports that review the actual impact of decisions are prepared by

Incremental analysis would be appropriate for

What of the following would not be relevant in a make-or-buy decision?

In a make-or-buy decision, opportunity costs are

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

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

In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

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

Filters