Question 1

Explain when a manager would use cost-volume-profit analysis.

Accepted Answer

Cost-volume-profit analysis is helpful f

Question 2

Fair Engineering Company manufactures part QE767 used in several of its engine models. Monthly production costs for 10,000 units are as follows:
  It is estimated that 20% of the fixed support costs assigned to part QE767 will no longer be incurred if the company purchases the part from the outside supplier. Fair Engineering Company has the option of purchasing the part from an outside supplier at $16 per unit.
-The maximum price that Fair Engineering Company should be willing to pay the outside supplier for each unit of part QE767 is:

Accepted Answer

A) $10. 
B) $15. 
C) $15.80. 
D) $16. 
A) $10. 
B) $15. 
C) $15.80. 
D) $16.

Question 3

Relevant costs in a make-or-buy decision of a part include:

Accepted Answer

A) setup overhead costs for the manufacture of the product using the outsourced part. 
B) currently used manufacturing capacity that has alternative uses when part is outsourced. 
C) annual plant insurance costs that will remain the same. 
D) corporate office costs that will be allocated differently. 
A) setup overhead costs for the manufacture of the product using the outsourced part. 
B) currently used manufacturing capacity that has alternative uses when part is outsourced. 
C) annual plant insurance costs that will remain the same. 
D) corporate office costs that will be allocated differently.

Question 4

Cost-volume-profit analysis may be used for single-product and multiproduct analysis but not in a service environment.

Accepted Answer

A) True 
 B)False

Question 5

Selling price per unit is $60,variable cost per unit is $30,and fixed cost per unit is $20.When this company operates above the break-even point,the sale of one more unit will increase net income by $10.

Accepted Answer

A) True 
 B)False

Question 6

When replacing an old machine with a new machine,the book value of the old machine is a relevant cost.

Accepted Answer

A) True 
 B)False

Question 7

Sanchez & Ryan, Inc, sells a single product. This year, 20,000 units were sold resulting in $130,000 of sales revenue, $60,000 of variable costs, and $17,500 of fixed costs.
-If sales increase by $19,500 in a year,profits will increase by:

Accepted Answer

A) $10,500. 
B) $17,500. 
C) $19,500. 
D) $35,000. 
A) $10,500. 
B) $17,500. 
C) $19,500. 
D) $35,000.

Question 8

Cost-volume-profit analysis assumes all of the following EXCEPT:

Accepted Answer

A) all costs are purely variable or fixed. 
B) units manufactured equal units sold. 
C) total variable costs remain the same over the relevant range. 
D) total fixed costs remain the same over the relevant range. 
A) all costs are purely variable or fixed. 
B) units manufactured equal units sold. 
C) total variable costs remain the same over the relevant range. 
D) total fixed costs remain the same over the relevant range.

Question 9

Which costs are relevant for making decisions that affect the short-term? The long-term? Why?

Accepted Answer

Relevant costs for making decisions that

Question 10

Currently,most companies consider annual salary costs as:

Accepted Answer

A) a fixed cost. 
B) a variable cost. 
C) an opportunity cost. 
D) a period cost. 
A) a fixed cost. 
B) a variable cost. 
C) an opportunity cost. 
D) a period cost.

Question 11

Outsourcing is risk-free to the purchaser of a part because the supplier now has the responsibility of producing the part.

Accepted Answer

A) True 
 B)False

Question 12

Are sunk costs considered relevant when choosing among alternatives? Explain.

Accepted Answer

No. Amounts that remain the same among a

Question 13

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 the layout reorganization,incremental manufacturing costs are projected to:

Accepted Answer

A) increase by $84,000 annually 
B) increase by $20,000 annually 
C) decrease by $20,000 annually 
D) decrease by $16,500 annually 
A) increase by $84,000 annually 
B) increase by $20,000 annually 
C) decrease by $20,000 annually 
D) decrease by $16,500 annually

Question 14

For external reporting,generally accepted accounting principles require that costs be classified as either variable or fixed costs.

Accepted Answer

A) True 
 B)False

Question 15

Sunk costs:

Accepted Answer

A) are relevant. 
B) are differential. 
C) have future implications. 
D) are ignored when evaluating alternatives. 
A) are relevant. 
B) are differential. 
C) have future implications. 
D) are ignored when evaluating alternatives.

Question 16

The most widespread use of cost information is in budgeting.

Accepted Answer

A) True 
 B)False

Question 17

When deciding to accept a one-time-only special order from a wholesaler,management should do all of the following EXCEPT:

Accepted Answer

A) analyze product costs. 
B) consider the impact of the special order on future prices of their products. 
C) determine whether excess capacity is available. 
D) verify past design costs for the product. 
A) analyze product costs. 
B) consider the impact of the special order on future prices of their products. 
C) determine whether excess capacity is available. 
D) verify past design costs for the product.

Question 18

Cost-volume-profit analysis is used PRIMARILY by management:

Accepted Answer

A) as a planning tool. 
B) for control purposes. 
C) to establish a target net income for next year. 
D) to attain extremely accurate financial results. 
A) as a planning tool. 
B) for control purposes. 
C) to establish a target net income for next year. 
D) to attain extremely accurate financial results.

Question 19

Which of the following costs are NEVER relevant in the decision-making process?

Accepted Answer

A) fixed costs 
B) historical costs 
C) relevant costs 
D) variable costs 
A) fixed costs 
B) historical costs 
C) relevant costs 
D) variable costs

Question 20

Are relevant revenues and costs the only information needed by managers to select among alternatives? Explain using examples.

Accepted Answer

No, relevant revenues and costs provide

Explain when a manager would use cost-volume-profit analysis.

Relevant costs in a make-or-buy decision of a part include:

Cost-volume-profit analysis may be used for single-product and multiproduct analysis but not in a service environment.

Selling price per unit is $60,variable cost per unit is $30,and fixed cost per unit is $20.When this company operates above the break-even point,the sale of one more unit will increase net income by $10.

When replacing an old machine with a new machine,the book value of the old machine is a relevant cost.

Sanchez & Ryan, Inc, sells a single product. This year, 20,000 units were sold resulting in $130,000 of sales revenue, $60,000 of variable costs, and $17,500 of fixed costs. -If sales increase by $19,500 in a year,profits will increase by:

Cost-volume-profit analysis assumes all of the following EXCEPT:

Which costs are relevant for making decisions that affect the short-term? The long-term? Why?

Currently,most companies consider annual salary costs as:

Outsourcing is risk-free to the purchaser of a part because the supplier now has the responsibility of producing the part.

Are sunk costs considered relevant when choosing among alternatives? Explain.

For external reporting,generally accepted accounting principles require that costs be classified as either variable or fixed costs.

Sunk costs:

The most widespread use of cost information is in budgeting.

When deciding to accept a one-time-only special order from a wholesaler,management should do all of the following EXCEPT:

Cost-volume-profit analysis is used PRIMARILY by management:

Which of the following costs are NEVER relevant in the decision-making process?

Are relevant revenues and costs the only information needed by managers to select among alternatives? Explain using examples.

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

Explain when a manager would use cost-volume-profit analysis.

Relevant costs in a make-or-buy decision of a part include:

Cost-volume-profit analysis may be used for single-product and multiproduct analysis but not in a service environment.

Selling price per unit is $60,variable cost per unit is $30,and fixed cost per unit is $20.When this company operates above the break-even point,the sale of one more unit will increase net income by $10.

When replacing an old machine with a new machine,the book value of the old machine is a relevant cost.

Sanchez & Ryan, Inc, sells a single product. This year, 20,000 units were sold resulting in $130,000 of sales revenue, $60,000 of variable costs, and $17,500 of fixed costs. -If sales increase by $19,500 in a year,profits will increase by:

Cost-volume-profit analysis assumes all of the following EXCEPT:

Which costs are relevant for making decisions that affect the short-term? The long-term? Why?

Currently,most companies consider annual salary costs as:

Outsourcing is risk-free to the purchaser of a part because the supplier now has the responsibility of producing the part.

Are sunk costs considered relevant when choosing among alternatives? Explain.

For external reporting,generally accepted accounting principles require that costs be classified as either variable or fixed costs.

Sunk costs:

The most widespread use of cost information is in budgeting.

When deciding to accept a one-time-only special order from a wholesaler,management should do all of the following EXCEPT:

Cost-volume-profit analysis is used PRIMARILY by management:

Which of the following costs are NEVER relevant in the decision-making process?

Are relevant revenues and costs the only information needed by managers to select among alternatives? Explain using examples.

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