Question 1

One incremental analysis decision is the allocation of limited resources.

Accepted Answer

A) True 
 B)False

Question 2

Which statement is true of an opportunity cost?

Accepted Answer

A) It is the cost of a special order option. 
B) It reduces the possibility of accepting a particular course of action. 
C) It is the potential benefit as a result of following an alternative course of action. 
D) It is a variable cost. 
A) It is the cost of a special order option. 
B) It reduces the possibility of accepting a particular course of action. 
C) It is the potential benefit as a result of following an alternative course of action. 
D) It is a variable cost.

Question 3

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 4

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 5

A decision whether to continue to buy a product instead of producing it externally depends specifically on the incremental costs and incremental revenues of making the change.

Accepted Answer

A) True 
 B)False

Question 6

Use the following information for questions 
Hermantic, Inc.can produce 100 units of a component part with the following costs:  
-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 7

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?

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 8

It is better to process further rather than sell now if the sales price increases.

Accepted Answer

A) True 
 B)False

Question 9

Diversified Machines has four product lines, one of which reflects the following results:   If this product line is eliminated, 40% of the fixed expenses can be eliminated and the other 60% will be allocated to other product lines.If management decides to eliminate this product line, what will happen to the company's net income?

Accepted Answer

A) It will increase by $20,000. 
B) It will decrease by $52,000. 
C) It will decrease by $32,000. 
D) It will increase by $48,000. 
A) It will increase by $20,000. 
B) It will decrease by $52,000. 
C) It will decrease by $32,000. 
D) It will increase by $48,000.

Question 10

What non-financial factors should be considered when making a decision about buying rather than making a component of a company's product?

Accepted Answer

A) Is the quality of the purchased component acceptable? 
B) Will the outside supplier increase prices significantly in the future? 
C) Will the supplier deliver on time? 
D) All of the above. 
A) Is the quality of the purchased component acceptable? 
B) Will the outside supplier increase prices significantly in the future? 
C) Will the supplier deliver on time? 
D) All of the above.

Question 11

Sunk costs are considered relevant when choosing among alternatives because they are differential.

Accepted Answer

A) True 
 B)False

Question 12

Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make or buy decision.Which statement is true of the opportunity cost?

Accepted Answer

A) Should be added to the "Buy" costs 
B) Should be subtracted from the "Make" costs 
C) Should be added to the "Make" costs 
D) Should be ignored if it does not involve a cash outlay. 
A) Should be added to the "Buy" costs 
B) Should be subtracted from the "Make" costs 
C) Should be added to the "Make" costs 
D) Should be ignored if it does not involve a cash outlay.

Question 13

SmartCard is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

Accepted Answer

A) Net income will decrease by the amount of the contribution margin of the product line being discontinued. 
B) The company's total fixed costs will increase. 
C) Total fixed costs will decrease by the amount of the product line's fixed costs. 
D) Net income will decrease by the amount of the product line's fixed costs. 
A) Net income will decrease by the amount of the contribution margin of the product line being discontinued. 
B) The company's total fixed costs will increase. 
C) Total fixed costs will decrease by the amount of the product line's fixed costs. 
D) Net income will decrease by the amount of the product line's fixed costs.

Question 14

Incremental costs are always relevant.

Accepted Answer

A) True 
 B)False

Question 15

What is the nature of an opportunity cost?

Accepted Answer

A) It is always variable. 
B) It is a potential benefit. 
C) It is included as part of cost of goods sold. 
D) It is a sunk cost. 
A) It is always variable. 
B) It is a potential benefit. 
C) It is included as part of cost of goods sold. 
D) It is a sunk cost.

Question 16

Which of the following statements about making decisions is correct?

Accepted Answer

A) Only relevant financial information should be considered. 
B) All information should be considered in the final decision. 
C) Management should consider both relevant financial and non-financial information. 
D) Management accountants should provide the information, but they should not make recommendations.It is up to the managers to make decisions. 
A) Only relevant financial information should be considered. 
B) All information should be considered in the final decision. 
C) Management should consider both relevant financial and non-financial information. 
D) Management accountants should provide the information, but they should not make recommendations.It is up to the managers to make decisions.

Question 17

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 18

In making decisions, management considers only financial information because accounting is presented in financial context.

Accepted Answer

A) True 
 B)False

Question 19

Direct materials, direct labour, and allocated fixed and variable manufacturing overhead are all relevant in a make or buy decision.

Accepted Answer

A) True 
 B)False

Question 20

Diaz Company's contribution margin is $4 per unit for Product A and $5 for Product B.Product A requires 2 machine hours and Product B requires 4 machine hours.How much is the contribution margin per unit of limited resource for each product?

Accepted Answer

The answer of Diaz Company's contribution margin is $4 per...

One incremental analysis decision is the allocation of limited resources.

Which statement is true of an opportunity cost?

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?

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

A decision whether to continue to buy a product instead of producing it externally depends specifically on the incremental costs and incremental revenues of making the change.

Use the following information for questions Hermantic, Inc.can produce 100 units of a component part with the following costs: -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"?

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?

It is better to process further rather than sell now if the sales price increases.

What non-financial factors should be considered when making a decision about buying rather than making a component of a company's product?

Sunk costs are considered relevant when choosing among alternatives because they are differential.

Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make or buy decision.Which statement is true of the opportunity cost?

SmartCard is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

Incremental costs are always relevant.

What is the nature of an opportunity cost?

Which of the following statements about making decisions is correct?

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

In making decisions, management considers only financial information because accounting is presented in financial context.

Direct materials, direct labour, and allocated fixed and variable manufacturing overhead are all relevant in a make or buy decision.

Diaz Company's contribution margin is $4 per unit for Product A and $5 for Product B.Product A requires 2 machine hours and Product B requires 4 machine hours.How much is the contribution margin per unit of limited resource for each product?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Variable Costing: 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

One incremental analysis decision is the allocation of limited resources.

Which statement is true of an opportunity cost?

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?

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

A decision whether to continue to buy a product instead of producing it externally depends specifically on the incremental costs and incremental revenues of making the change.

Use the following information for questions Hermantic, Inc.can produce 100 units of a component part with the following costs: -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"?

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?

It is better to process further rather than sell now if the sales price increases.

What non-financial factors should be considered when making a decision about buying rather than making a component of a company's product?

Sunk costs are considered relevant when choosing among alternatives because they are differential.

Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make or buy decision.Which statement is true of the opportunity cost?

SmartCard is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

Incremental costs are always relevant.

What is the nature of an opportunity cost?

Which of the following statements about making decisions is correct?

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

In making decisions, management considers only financial information because accounting is presented in financial context.

Direct materials, direct labour, and allocated fixed and variable manufacturing overhead are all relevant in a make or buy decision.

Diaz Company's contribution margin is $4 per unit for Product A and $5 for Product B.Product A requires 2 machine hours and Product B requires 4 machine hours.How much is the contribution margin per unit of limited resource for each product?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Variable Costing: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters