Question 1

Marcus Company gathered the following data about the three products that it produces:   Which of the products should not be processed further?

Accepted Answer

A)  Product A 
B)  Product B 
C)  Product C 
D)  Products A and C 
A)  Product A 
B)  Product B 
C)  Product C 
D)  Products A and C

Question 2

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?

Accepted Answer

A)  $8,000, $10,000, and $14,000 
B)  $8,000, $3,000, and $14,000 
C)  $10,000, $3,000, and $14,000 
D)  $8,000, $10,000, $3,000 and $14,000 
A)  $8,000, $10,000, and $14,000 
B)  $8,000, $3,000, and $14,000 
C)  $10,000, $3,000, and $14,000 
D)  $8,000, $10,000, $3,000 and $14,000

Question 3

Which of the following stages of the management decision-making process is improperly sequenced?

Accepted Answer

A)  Evaluate possible courses of action$\rightarrow$  Make decision. 
B)  Assign responsibility for the decision $\rightarrow$ Identify the problem. 
C)  Identify the problem $\rightarrow$  Determine possible courses of action. 
D)  Assign responsibility for decision $\rightarrow$ Determine possible courses of action. 
A)  Evaluate possible courses of action$\rightarrow$  Make decision. 
B)  Assign responsibility for the decision $\rightarrow$ Identify the problem. 
C)  Identify the problem $\rightarrow$  Determine possible courses of action. 
D)  Assign responsibility for decision $\rightarrow$ Determine possible courses of action.

Question 4

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 5

Janssen Company has old inventory on hand that cost $24,000. Its scrap value is $32,000. The inventory could be sold for $80,000 if manufactured further at an additional cost of $24,000. What should Janssen do?

Accepted Answer

A)  Sell the inventory for $32,000 scrap value 
B)  Dispose of the inventory to avoid any further decline in value 
C)  Hold the inventory at its $24,000 cost 
D)  Manufacture further and sell it for $80,000. 
A)  Sell the inventory for $32,000 scrap value 
B)  Dispose of the inventory to avoid any further decline in value 
C)  Hold the inventory at its $24,000 cost 
D)  Manufacture further and sell it for $80,000.

Question 6

Accounting contributes to management's decision-making process through internal reports that review the actual impact of the decision.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?

Accepted Answer

A)  Unit variable costs will increase. 
B)  Fixed costs will not be relevant. 
C)  Both variable and fixed costs will be relevant. 
D)  The company should accept the order. 
A)  Unit variable costs will increase. 
B)  Fixed costs will not be relevant. 
C)  Both variable and fixed costs will be relevant. 
D)  The company should accept the order.

Question 9

New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.

Accepted Answer

A)  Face cream must be processed further because its profit is $9 each. 
B)  Face cream must not be processed further because costs increase more than revenue. 
C)  Face cream must not be processed further because it decreases profit by $1 each. 
D)  Face cream must be processed further because it increases profit by $3 each. 
A)  Face cream must be processed further because its profit is $9 each. 
B)  Face cream must not be processed further because costs increase more than revenue. 
C)  Face cream must not be processed further because it decreases profit by $1 each. 
D)  Face cream must be processed further because it increases profit by $3 each.

Question 10

Able Company's unit manufacturing cost is:   A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is $80. If the order is accepted, unit variable costs will increase by $2 for additional freight costs. If the order is accepted, incremental profit (loss) will be

Accepted Answer

A)  $(46,000). 
B)  $6,000. 
C)  $(40,000). 
D)  $10,000. 
A)  $(46,000). 
B)  $6,000. 
C)  $(40,000). 
D)  $10,000.

Question 11

Use the following information for questions.
A company's unit costs based on 100,000 units are:   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 incremental profit (loss) from accepting the order would be

Accepted Answer

A)  $30,000. 
B)  $(150,000). 
C)  $180,000. 
D)  $(90,000). 
A)  $30,000. 
B)  $(150,000). 
C)  $180,000. 
D)  $(90,000).

Question 12

Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?

Accepted Answer

A)  Reject the order. 
B)  Consider the opportunity cost of lost sales in the incremental analysis. 
C)  Accept the order. 
D)  Accept the order if the plant is below capacity. 
A)  Reject the order. 
B)  Consider the opportunity cost of lost sales in the incremental analysis. 
C)  Accept the order. 
D)  Accept the order if the plant is below capacity.

Question 13

Which is the first step in the management decision-making process?

Accepted Answer

A)  Determine and evaluate possible courses of action. 
B)  Review results of the decision. 
C)  Identify the problem and assign responsibility. 
D)  Make a decision. 
A)  Determine and evaluate possible courses of action. 
B)  Review results of the decision. 
C)  Identify the problem and assign responsibility. 
D)  Make a decision.

Question 14

If an unprofitable segment is eliminated

Accepted Answer

A)  it is impossible for net income to decrease. 
B)  fixed expenses allocated to the eliminated segment will be eliminated. 
C)  variable expenses of the eliminated segment will be eliminated. 
D)  it is impossible for net income to increase. 
A)  it is impossible for net income to decrease. 
B)  fixed expenses allocated to the eliminated segment will be eliminated. 
C)  variable expenses of the eliminated segment will be eliminated. 
D)  it is impossible for net income to increase.

Question 15

Which of the following is not a qualitative factor to be considered in a make-or-buy decision?

Accepted Answer

A)  Possible lost jobs from buying outside 
B)  Supplier's ability to satisfy quality standards 
C)  Incremental benefit from buying outside 
D)  Supplier's ability to meet production schedule 
A)  Possible lost jobs from buying outside 
B)  Supplier's ability to satisfy quality standards 
C)  Incremental benefit from buying outside 
D)  Supplier's ability to meet production schedule

Question 16

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

Accepted Answer

A)  increase by $40,000. 
B)  decrease by $90,000. 
C)  decrease by $12,000. 
D)  increase by $12,000. 
A)  increase by $40,000. 
B)  decrease by $90,000. 
C)  decrease by $12,000. 
D)  increase by $12,000.

Question 17

Sedgwick Inc. is considering Plan 1 which is estimated to have sales of $40,000 and costs of $15,500. The company currently has sales of $37,000 and costs of $14,000.
Instructions
Compare plans using incremental analysis.

Accepted Answer

The answer of Sedgwick Inc. is considering Plan 1 which...

Question 18

Which of the following is a true statement about cost behaviors in incremental analysis?
1) Fixed costs will not change between alternatives.
2) Fixed costs may change between alternatives.
3) Variable costs will always change between alternatives.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  2 and 3 
A)  1 
B)  2 
C)  3 
D)  2 and 3

Question 19

Management is often faced with the alternative of continuing to make a product or component internally, or going to an external source and purchasing the product or component. In gathering relevant information for these two alternatives, briefly identify the quantitative factors that should be considered. Are there any qualitative factors that should also be considered?

Accepted Answer

The quantitative factors to be considere

Question 20

Galley Industries can produce 100 units of a necessary component part with the following costs:   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

Exam 20: Incremental Analysis

Marcus Company gathered the following data about the three products that it produces: Which of the products should not be processed further?

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?

Which of the following stages of the management decision-making process is improperly sequenced?

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

Janssen Company has old inventory on hand that cost $24,000. Its scrap value is $32,000. The inventory could be sold for $80,000 if manufactured further at an additional cost of $24,000. What should Janssen do?

Accounting contributes to management's decision-making process through internal reports that review the actual impact of the decision.

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

Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?

New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.

Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?

Which is the first step in the management decision-making process?

If an unprofitable segment is eliminated

Which of the following is not a qualitative factor to be considered in a make-or-buy decision?

Sedgwick Inc. is considering Plan 1 which is estimated to have sales of $40,000 and costs of $15,500. The company currently has sales of $37,000 and costs of $14,000. Instructions Compare plans using incremental analysis.

Which of the following is a true statement about cost behaviors in incremental analysis? 1) Fixed costs will not change between alternatives. 2) Fixed costs may change between alternatives. 3) Variable costs will always change between alternatives.

Galley Industries can produce 100 units of a necessary component part with the following costs: 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?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, and Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

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

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

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