Question 1

The general rule is to keep any product or service in the short term:

Accepted Answer

A)  That can be sold 
B)  That covers variable costs 
C)  That covers variable costs plus any fixed costs that can be avoided if the product or service is dropped 
D)  If it covers part of the avoidable costs 
A)  That can be sold 
B)  That covers variable costs 
C)  That covers variable costs plus any fixed costs that can be avoided if the product or service is dropped 
D)  If it covers part of the avoidable costs

Question 2

In multi-product firms, managers need to consider the effect on demand for other products when they make a keep or drop decision about one product.

Accepted Answer

A) True 
 B)False

Question 3

Growe Company manufactures sewing machines and requires 30,000 units of a component that is used in the manufacturing process. If Growe buys the part from Zigler Brothers the plant will be idle. Of the fixed, 55% overhead will continue regardless of the decision. The cost to buy the part from Zigler is $46. The unit cost to make the part is: $$\begin{array} { l r } 
\text { Direct materials } & \$ 12 \
\text { Direct labour } & 20 \
\text { Variable overhead } & 12 \
\text { Average fixed overhead } & 10 \
\quad \text { Total } & \$ 54
\end{array}$$ Relevant costs to make the part are:

Accepted Answer

A)  $1,320,000 
B)  $1,380,000 
C)  $1,620,000 
D)  $1,455,000 
A)  $1,320,000 
B)  $1,380,000 
C)  $1,620,000 
D)  $1,455,000

Question 4

Effect on brand name recognition is a qualitative factor that managers should consider in:

Accepted Answer

A)  Product line keep and drop decisions 
B)  Special order decisions 
C)  Cost prediction decisions 
D)  Make or buy decisions 
A)  Product line keep and drop decisions 
B)  Special order decisions 
C)  Cost prediction decisions 
D)  Make or buy decisions

Question 5

The process for making a nonroutine operating decision starts with identifying the decision type.

Accepted Answer

A) True 
 B)False

Question 6

The number of lawnmowers available could be a constraint for a lawn care service.

Accepted Answer

A) True 
 B)False

Question 7

A bottleneck:

Accepted Answer

A)  Is not a capacity constraint 
B)  Has an opportunity cost of lost revenue from unmet demand 
C)  Is unrelated to capacity 
D)  Cannot be used efficiently 
A)  Is not a capacity constraint 
B)  Has an opportunity cost of lost revenue from unmet demand 
C)  Is unrelated to capacity 
D)  Cannot be used efficiently

Question 8

N.G., Inc. currently buys 9,000 subcomponents from an outside supplier at $10 each. The company has excess capacity, which it sublets to another company for $20,000 per year. If the company were to use the idle capacity to produce the subcomponent internally, it would incur variable production costs of $6 per unit, and it would hire a new supervisor for $15,000 per year. Other fixed overhead costs would not change, but the average overhead cost per subcomponent unit would be $2. What is the advantage or disadvantage (in dollars) if N.G. makes the subcomponent instead of continuing to buy outside and subletting the excess capacity?

Accepted Answer

A)  $6,000 disadvantage 
B)  $21,000 disadvantage 
C)  $1,000 advantage 
D)  $21,000 advantage 
A)  $6,000 disadvantage 
B)  $21,000 disadvantage 
C)  $1,000 advantage 
D)  $21,000 advantage

Question 9

Managers may outsource a service because they do not consider it a core competency.

Accepted Answer

A) True 
 B)False

Question 10

Sunk costs should be considered in:

Accepted Answer

A)  Both routine and nonroutine operating decisions 
B)  Neither routine or nonroutine operating decisions 
C)  Routine decisions only 
D)  Nonroutine operating decisions only 
A)  Both routine and nonroutine operating decisions 
B)  Neither routine or nonroutine operating decisions 
C)  Routine decisions only 
D)  Nonroutine operating decisions only

Question 11

In making a decision to drop a product line, variable costs are:

Accepted Answer

A)  Always relevant 
B)  Never relevant 
C)  Usually relevant 
D)  Usually sunk 
A)  Always relevant 
B)  Never relevant 
C)  Usually relevant 
D)  Usually sunk

Question 12

The assumption that organizations seek to maximize short-term profits ignores:

Accepted Answer

A)  Qualitative factors 
B)  Fixed costs 
C)  Constrained resources 
D)  Managers' desire for bonuses 
A)  Qualitative factors 
B)  Fixed costs 
C)  Constrained resources 
D)  Managers' desire for bonuses

Question 13

Uncertainties affect:

Accepted Answer

A)  Special order decisions and outsourcing decisions, but not product emphasis decisions 
B)  Special order and product emphasis decisions, but not outsourcing decisions 
C)  Product emphasis and outsourcing decisions, but not special order decisions 
D)  Special order decisions, outsourcing decisions and product emphasis decisions 
A)  Special order decisions and outsourcing decisions, but not product emphasis decisions 
B)  Special order and product emphasis decisions, but not outsourcing decisions 
C)  Product emphasis and outsourcing decisions, but not special order decisions 
D)  Special order decisions, outsourcing decisions and product emphasis decisions

Question 14

Managers should accept a special order if its price is greater than the sum of:

Accepted Answer

A)  All variable costs and all fixed costs 
B)  All variable costs and all opportunity costs 
C)  All fixed costs and all opportunity costs 
D)  Variable costs, relevant fixed costs and opportunity costs 
A)  All variable costs and all fixed costs 
B)  All variable costs and all opportunity costs 
C)  All fixed costs and all opportunity costs 
D)  Variable costs, relevant fixed costs and opportunity costs

Question 15

Relationships with resource suppliers are not a consideration in constrained resource decisions.

Accepted Answer

A) True 
 B)False

Question 16

Tyke, Inc. produces two products, A and B, each requiring direct material and labour. Total labour available is 200 hours, and 300 kilograms of material. Each unit of A sells for $10, and B sells for $15. Given the following linear programming information: $$\begin{array} { l l } 
\text { Maximize: } & \$ 4 \mathrm {~A} + \$ 5 \mathrm { Y } \
\text { Subject to: } & 3 \mathrm {~A} + 1 \mathrm {~B} = 200 \
& 2 \mathrm {~A} + 2 \mathrm {~B} = 300
\end{array}$$ What are the variable costs per unit for A and B?

Accepted Answer

A)  $4 and $15 
B)  $14 and $19 
C)  $6 and $10 
D)  $7 and $14 
A)  $4 and $15 
B)  $14 and $19 
C)  $6 and $10 
D)  $7 and $14

Question 17

Which of the following is an opportunity cost that should be considered in an outsourcing decision?

Accepted Answer

A)  Avoidable fixed costs 
B)  Benefits from alternate uses of released capacity 
C)  Unavoidable fixed costs 
D)  Employee morale 
A)  Avoidable fixed costs 
B)  Benefits from alternate uses of released capacity 
C)  Unavoidable fixed costs 
D)  Employee morale

Question 18

Emphasizing products with higher contribution margins assumes that fixed costs are unaffected by product mix.

Accepted Answer

A) True 
 B)False

Question 19

When resources are constrained, managers should emphasize the product with the:

Accepted Answer

A)  Highest contribution margin per unit 
B)  Highest contribution margin per unit of constrained resource 
C)  Lowest average cost 
D)  Largest market share 
A)  Highest contribution margin per unit 
B)  Highest contribution margin per unit of constrained resource 
C)  Lowest average cost 
D)  Largest market share

Question 20

Since nonroutine operating decisions do not typically involve large dollar amounts, managers do not need to consider uncertainties when evaluating them.

Accepted Answer

A) True 
 B)False

The general rule is to keep any product or service in the short term:

In multi-product firms, managers need to consider the effect on demand for other products when they make a keep or drop decision about one product.

Effect on brand name recognition is a qualitative factor that managers should consider in:

The process for making a nonroutine operating decision starts with identifying the decision type.

The number of lawnmowers available could be a constraint for a lawn care service.

A bottleneck:

Managers may outsource a service because they do not consider it a core competency.

Sunk costs should be considered in:

In making a decision to drop a product line, variable costs are:

The assumption that organizations seek to maximize short-term profits ignores:

Uncertainties affect:

Managers should accept a special order if its price is greater than the sum of:

Relationships with resource suppliers are not a consideration in constrained resource decisions.

Which of the following is an opportunity cost that should be considered in an outsourcing decision?

Emphasizing products with higher contribution margins assumes that fixed costs are unaffected by product mix.

When resources are constrained, managers should emphasize the product with the:

Since nonroutine operating decisions do not typically involve large dollar amounts, managers do not need to consider uncertainties when evaluating them.

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Cost-Volume-Profit Analysis

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Filters

Exam 4: Relevant Information for Decision Making

The general rule is to keep any product or service in the short term:

In multi-product firms, managers need to consider the effect on demand for other products when they make a keep or drop decision about one product.

Effect on brand name recognition is a qualitative factor that managers should consider in:

The process for making a nonroutine operating decision starts with identifying the decision type.

The number of lawnmowers available could be a constraint for a lawn care service.

A bottleneck:

Managers may outsource a service because they do not consider it a core competency.

Sunk costs should be considered in:

In making a decision to drop a product line, variable costs are:

The assumption that organizations seek to maximize short-term profits ignores:

Uncertainties affect:

Managers should accept a special order if its price is greater than the sum of:

Relationships with resource suppliers are not a consideration in constrained resource decisions.

Which of the following is an opportunity cost that should be considered in an outsourcing decision?

Emphasizing products with higher contribution margins assumes that fixed costs are unaffected by product mix.

When resources are constrained, managers should emphasize the product with the:

Since nonroutine operating decisions do not typically involve large dollar amounts, managers do not need to consider uncertainties when evaluating them.

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Cost-Volume-Profit Analysis

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Filters