Question 1

If a company must expand capacity to accept a special order, it is likely that there will be

Accepted Answer

A)  an increase in unit variable costs. 
B)  no increase in fixed costs. 
C)  an increase in variable and fixed costs per unit. 
D)  an increase in fixed costs. 
A)  an increase in unit variable costs. 
B)  no increase in fixed costs. 
C)  an increase in variable and fixed costs per unit. 
D)  an increase in fixed costs.

Question 2

Use the following information for questions 
Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000.
-At what price were the updated versions sold?

Accepted Answer

A)  $26,800 
B)  $13,200 
C)  $13,600 
D)  $16,000 
A)  $26,800 
B)  $13,200 
C)  $13,600 
D)  $16,000

Question 3

Use the following information for questions 
Paul Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period: $\begin{array}{lrrr}& \text { Sales Value } & \text { Additional } & \text { Sales Value after } \
\text { Product } & \text { at Split-off } & \text { Variable Costs } & \text { FurtherProcessing }\
\text { Green lumber } & \$ 159,600 & \$ 24,000 & \$ 178,000 \
\text { Rough lumber } & 124,000 & 28,200 & 173,600 \
\text { Sawdust } & 102,000 & 19,600 & 130,000
\end{array}$
-Which products should be processed further?

Accepted Answer

A)  Green lumber and rough lumber 
B)  Green lumber and sawdust 
C)  Rough lumber and sawdust 
D)  All three products 
A)  Green lumber and rough lumber 
B)  Green lumber and sawdust 
C)  Rough lumber and sawdust 
D)  All three products

Question 4

Nonfinancial information that management might evaluate in making a decision would not include

Accepted Answer

A)  employee turnover. 
B)  contribution margin. 
C)  the environment. 
D)  the corporate profile in the community. 
A)  employee turnover. 
B)  contribution margin. 
C)  the environment. 
D)  the corporate profile in the community.

Question 5

The elimination of an unprofitable product line may adversely affect the remaining product lines.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A company is contemplating the acceptance of a special order. The order would not affect regular sales and could be filled without exceeding plant capacity. However, a new stamping machine would have to be purchased in order to stamp the customer's name on the product. Which of the following is likely?

Accepted Answer

A)  Total variable costs will be irrelevant. 
B)  Only variable costs will be relevant. 
C)  Only fixed costs will be relevant. 
D)  Both variable and fixed costs will be relevant. 
A)  Total variable costs will be irrelevant. 
B)  Only variable costs will be relevant. 
C)  Only fixed costs will be relevant. 
D)  Both variable and fixed costs will be relevant.

Question 8

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.
-The net advantage (disadvantage) of replacing the old equipment with the new equipment is

Accepted Answer

A)  $60,000 
B)  $(15,000) 
C)  $(75,000) 
D)  $90,000 
A)  $60,000 
B)  $(15,000) 
C)  $(75,000) 
D)  $90,000

Question 9

It is better not to replace old equipment if it is not fully depreciated.

Accepted Answer

A) True 
 B)False

Question 10

Use the following information for questions 
A company's unit costs based on 100,000 units are: $\begin{array}{l}
\text { Variable costs }&\$75 \
\text { Fixed costs }&30
\end{array}$ The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone.
-The opportunity cost associated with this order is

Accepted Answer

A)  $225,000. 
B)  $495,000. 
C)  $270,000. 
D)  $405,000. 
A)  $225,000. 
B)  $495,000. 
C)  $270,000. 
D)  $405,000.

Question 11

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

Accepted Answer

A)  assign responsibility for the decision. 
B)  provide relevant revenue and cost data about each course of action. 
C)  determine the amount of money that should be spent on a project. 
D)  decide which actions that management should consider. 
A)  assign responsibility for the decision. 
B)  provide relevant revenue and cost data about each course of action. 
C)  determine the amount of money that should be spent on a project. 
D)  decide which actions that management should consider.

Question 12

Pratt Company has old inventory on hand that cost $15,000. Its scrap value is $20,000. The inventory could be sold for $50,000 if manufactured further at an additional cost of $15,000. What should Pratt do?

Accepted Answer

A)  Sell the inventory for $20,000 scrap value 
B)  Dispose of the inventory to avoid any further decline in value 
C)  Hold the inventory at its $15,000 cost 
D)  Manufacture further and sell it for $50,000 
A)  Sell the inventory for $20,000 scrap value 
B)  Dispose of the inventory to avoid any further decline in value 
C)  Hold the inventory at its $15,000 cost 
D)  Manufacture further and sell it for $50,000

Question 13

The process of evaluating financial data that change under alternative courses of action is called

Accepted Answer

A)  double entry analysis. 
B)  contribution margin analysis. 
C)  incremental analysis. 
D)  cost-benefit analysis. 
A)  double entry analysis. 
B)  contribution margin analysis. 
C)  incremental analysis. 
D)  cost-benefit analysis.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The cost to produce Part A was $20 per unit in 2019. During 2020, it has increased to $23 per unit. In 2020, Supplier Company has offered to supply Part A for $18 per unit. For the make-or-buy decision,

Accepted Answer

A)  incremental revenues are $5 per unit. 
B)  incremental costs are $3 per unit. 
C)  net relevant costs are $3 per unit. 
D)  differential costs are $5 per unit. 
A)  incremental revenues are $5 per unit. 
B)  incremental costs are $3 per unit. 
C)  net relevant costs are $3 per unit. 
D)  differential costs are $5 per unit.

Question 16

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 17

Book value of old equipment is considered to be a

Accepted Answer

A)  relevant cost. 
B)  semi-relevant cost. 
C)  sunk cost. 
D)  cost that can be changed by a present or future decision. 
A)  relevant cost. 
B)  semi-relevant cost. 
C)  sunk cost. 
D)  cost that can be changed by a present or future decision.

Question 18

Tasty Bites produces corn chips. The cost of one batch is below: $$\begin{array} { l r } 
\text { Direct materials } & \$ 18 \
\text { Direct labor } & 13 \
\text { Variable overhead } & 11 \
\text { Fixed overhead } & 14
\end{array}$$ An outside supplier has offered to produce the corn chips for $30 per batch. How much will Tasty Bites save if it accepts the offer?

Accepted Answer

A)  $15 per batch 
B)  $12 per batch 
C)  $26 per batch 
D)  $1 per batch 
A)  $15 per batch 
B)  $12 per batch 
C)  $26 per batch 
D)  $1 per batch

Question 19

The basic decision rule in a sell or process further decision is: sell without further processing as long as the incremental revenue from processing exceeds the incremental processing costs.

Accepted Answer

A) True 
 B)False

Question 20

An opportunity cost

Accepted Answer

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.

If a company must expand capacity to accept a special order, it is likely that there will be

Nonfinancial information that management might evaluate in making a decision would not include

The elimination of an unprofitable product line may adversely affect the remaining product lines.

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

It is better not to replace old equipment if it is not fully depreciated.

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

Pratt Company has old inventory on hand that cost $15,000. Its scrap value is $20,000. The inventory could be sold for $50,000 if manufactured further at an additional cost of $15,000. What should Pratt do?

The process of evaluating financial data that change under alternative courses of action is called

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

The cost to produce Part A was $20 per unit in 2019. During 2020, it has increased to $23 per unit. In 2020, Supplier Company has offered to supply Part A for $18 per unit. For the make-or-buy decision,

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

Book value of old equipment is considered to be a

Tasty Bites produces corn chips. The cost of one batch is below: Direct materials \ 18 Direct labor 13 Variable overhead 11 Fixed overhead 14 An outside supplier has offered to produce the corn chips for $30 per batch. How much will Tasty Bites save if it accepts the offer?

The basic decision rule in a sell or process further decision is: sell without further processing as long as the incremental revenue from processing exceeds the incremental processing costs.

An opportunity cost

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 7: Incremental Analysis

If a company must expand capacity to accept a special order, it is likely that there will be

Nonfinancial information that management might evaluate in making a decision would not include

The elimination of an unprofitable product line may adversely affect the remaining product lines.

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

It is better not to replace old equipment if it is not fully depreciated.

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

Pratt Company has old inventory on hand that cost $15,000. Its scrap value is $20,000. The inventory could be sold for $50,000 if manufactured further at an additional cost of $15,000. What should Pratt do?

The process of evaluating financial data that change under alternative courses of action is called

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

The cost to produce Part A was $20 per unit in 2019. During 2020, it has increased to $23 per unit. In 2020, Supplier Company has offered to supply Part A for $18 per unit. For the make-or-buy decision,

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

Book value of old equipment is considered to be a

Tasty Bites produces corn chips. The cost of one batch is below: Direct materials \ 18 Direct labor 13 Variable overhead 11 Fixed overhead 14 An outside supplier has offered to produce the corn chips for $30 per batch. How much will Tasty Bites save if it accepts the offer?

The basic decision rule in a sell or process further decision is: sell without further processing as long as the incremental revenue from processing exceeds the incremental processing costs.

An opportunity cost

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters