Question 1

In recent years,fixed costs have decreased as a proportion of total manufacturing costs.

Accepted Answer

A) True 
 B)False  False

Question 2

Relevant costs of a make-or-buy decision for a part include all of the following EXCEPT:

Accepted Answer

A) fixed salaries that will not be incurred if the part is outsourced. 
B) current direct material costs of the part. 
C) special machinery for the part that has no resale value. 
D) material-handling costs that can be eliminated if the part is outsourced. 
A) fixed salaries that will not be incurred if the part is outsourced. 
B) current direct material costs of the part. 
C) special machinery for the part that has no resale value. 
D) material-handling costs that can be eliminated if the part is outsourced. C

Question 3

In make-or-buy decisions,the suppliers' reputation for quality and service is a relevant quantitative factor.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following would NOT be considered in a make-or-buy decision?

Accepted Answer

A) fixed costs that will no longer be incurred 
B) variable costs of production 
C) potential rental income from space occupied by the production area 
D) unchanged supervisory costs 
A) fixed costs that will no longer be incurred 
B) variable costs of production 
C) potential rental income from space occupied by the production area 
D) unchanged supervisory costs

Question 5

Governments are frequent users of cost reimbursement contracts.

Accepted Answer

A) True 
 B)False

Question 6

A processing cycle efficiency (PCE)of 18% indicates better efficiency than a PCE of 50%.

Accepted Answer

A) True 
 B)False

Question 7

Quiett Truck manufactures part WB23 used in several of its truck models.10,000 units are produced each year with production costs as follows:
   
Quiett Truck has the option of purchasing part WB23 from an outside supplier at $11.20 per unit.If part WB23 is outsourced,40% of the fixed costs cannot be immediately converted to other uses.
Required:
a. Describe avoidable costs.What amount of the part WB23's production costs is avoidable?
b. Should Quiett Truck outsource part WB23? Why or why not?
c. What other items should Quiett Truck consider before outsourcing any of the parts it currently manufactures?

Accepted Answer

a. Avoidable costs are those costs elimi

Question 8

A restaurant is deciding whether it wants to update its image or not.It currently has a cozy appeal with an outdated décor that is still in good condition,menus and carpet that need to be replaced anyway,and loyal customers.
Identify for the restaurant management
a.those costs that are relevant to this decision,
b.those costs that are not relevant,
c.and qualitative considerations.

Accepted Answer

For the decision of whether to update th

Question 9

Nanny McPhee,the owner and manager of Nanny's Roasted Chicken Company,replaced the company's convection ovens just six months ago.Today,Green Valley Oven Manufacturing announced the availability of a new convection oven that cooks much more quickly with lower operating expenses.Nanny is considering the purchase of this faster,lower-operating cost,convection oven to replace the existing one they recently purchased.Selected information about the two ovens is given below:
   
Required:
a. What costs are sunk?
b. What costs are relevant?
c. What are the net cash flows over the next 10 years assuming that Nanny purchases the new convection oven?
d. What other factors should Nanny consider when making this decision?

Accepted Answer

a. Sunk costs include the original cost

Question 10

Umberger Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:   
Inventory carrying costs are estimated to be 10% per year.
-As a result of switching to a cellular manufacturing operation,total benefits are projected to increase annually by:

Accepted Answer

A) $216,500. 
B) $200,000. 
C) $183,500. 
D) $176,500. 
A) $216,500. 
B) $200,000. 
C) $183,500. 
D) $176,500.

Question 11

Bob's Textile Company sells shirts for men and boys.The average selling price and variable cost for each product are as follows:
Men's Boys
Selling price $28.80 $24.00
Variable cost $20.42 $16.80
Total fixed costs $38,400
Required:
Assume the sales mix is 2 men's shirts for each boy's shirt:
a. What is the weighted revenue per unit of composite average product,the weighted average variable cost,and the weighted contribution margin per unit of average product?
b. What is the break-even point in units for each type of shirt?
c. What is the operating income,assuming sales total 9,000 shirts?

Accepted Answer

a. $28.80 (2/3)+ $24.00(1/3)= $27.22 rev

Question 12

An example of a sunk cost is the historical cost paid for equipment.

Accepted Answer

A) True 
 B)False

Question 13

Break-even point is NOT an important concept since the goal of business is to make a profit.

Accepted Answer

A) True 
 B)False

Question 14

Fixed costs:

Accepted Answer

A) may be either direct or indirect costs. 
B) vary with production or sales volume. 
C) include parts and materials used to manufacture a product. 
D) can be adjusted in the short run to meet actual demands. 
A) may be either direct or indirect costs. 
B) vary with production or sales volume. 
C) include parts and materials used to manufacture a product. 
D) can be adjusted in the short run to meet actual demands.

Question 15

Alistar's Best reported the following for 2011:
   
Required:
a.Compute the contribution margin.
b.Compute the gross margin.
c.Compute the operating income.

Accepted Answer

a. Contribution margin $16,000

Question 16

Contribution margin equals revenues minus:

Accepted Answer

A) product costs. 
B) period costs. 
C) variable costs. 
D) fixed costs. 
A) product costs. 
B) period costs. 
C) variable costs. 
D) fixed costs.

Question 17

Freddie's Fudge Factory currently makes fudge for retail and mail order customers.It also offers a variety of roasted nuts.Fudge sales have increased over the past year,so Freddie is considering outsourcing the roasted nuts and using the roasting space to make additional fudge.A reliable supplier has quoted a price of $0.85 per pound for the roasted nuts.The following amounts reflect the in-house manufacturing costs per pound for the roasted nuts:
   
Required:
a. Should Freddie's Fudge Factory outsource the roasted nuts? Why or why not? Discuss all items that should be considered.
b. What incentives can Freddie offer the supplier of the roasted nuts to encourage continued reliability?

Accepted Answer

a. Because Freddie's Fudge Factory can m

Question 18

The salary of the company president is a fixed manufacturing cost.

Accepted Answer

A) True 
 B)False

Question 19

Problems involving two or more constraints are often solved using linear programming.

Accepted Answer

A) True 
 B)False

Question 20

Costs are relevant to a particular decision if they:

Accepted Answer

A) are variable costs. 
B) are fixed costs. 
C) differ across, the decision alternatives being considered. 
D) remain unchanged across the alternatives being considered. 
A) are variable costs. 
B) are fixed costs. 
C) differ across, the decision alternatives being considered. 
D) remain unchanged across the alternatives being considered.

In recent years,fixed costs have decreased as a proportion of total manufacturing costs.

Relevant costs of a make-or-buy decision for a part include all of the following EXCEPT:

In make-or-buy decisions,the suppliers' reputation for quality and service is a relevant quantitative factor.

Which of the following would NOT be considered in a make-or-buy decision?

Governments are frequent users of cost reimbursement contracts.

A processing cycle efficiency (PCE)of 18% indicates better efficiency than a PCE of 50%.

An example of a sunk cost is the historical cost paid for equipment.

Break-even point is NOT an important concept since the goal of business is to make a profit.

Fixed costs:

Alistar's Best reported the following for 2011: Required: a.Compute the contribution margin. b.Compute the gross margin. c.Compute the operating income.

Contribution margin equals revenues minus:

The salary of the company president is a fixed manufacturing cost.

Problems involving two or more constraints are often solved using linear programming.

Costs are relevant to a particular decision if they:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Financial Control

Filters

Exam 3: Using Costs in Decision Making

In recent years,fixed costs have decreased as a proportion of total manufacturing costs.

Relevant costs of a make-or-buy decision for a part include all of the following EXCEPT:

In make-or-buy decisions,the suppliers' reputation for quality and service is a relevant quantitative factor.

Which of the following would NOT be considered in a make-or-buy decision?

Governments are frequent users of cost reimbursement contracts.

A processing cycle efficiency (PCE)of 18% indicates better efficiency than a PCE of 50%.

An example of a sunk cost is the historical cost paid for equipment.

Break-even point is NOT an important concept since the goal of business is to make a profit.

Fixed costs:

Alistar's Best reported the following for 2011: Required: a.Compute the contribution margin. b.Compute the gross margin. c.Compute the operating income.

Contribution margin equals revenues minus:

The salary of the company president is a fixed manufacturing cost.

Problems involving two or more constraints are often solved using linear programming.

Costs are relevant to a particular decision if they:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Financial Control

Filters