Question 1

Which of the following is an assumption of linear programming?

Accepted Answer

A)  Average variable costs remain constant throughout the year. 
B)  Opportunity costs are irrelevant in decision making. 
C)  Few sunk costs are relevant in decision making. 
D)  All costs are either variable or fixed for a single cost driver. 
A)  Average variable costs remain constant throughout the year. 
B)  Opportunity costs are irrelevant in decision making. 
C)  Few sunk costs are relevant in decision making. 
D)  All costs are either variable or fixed for a single cost driver.

Question 2

Striker 44 Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 12,000 units of this part are as follows:
 
Of the fixed factory overhead costs, $58,000 is avoidable.
Assuming no other use of their facilities, the highest price that McMurphy should be willing to pay for 12,000 units of the part is ________.

Accepted Answer

A)  $408,000 
B)  $273,000 
C)  $331,000 
D)  $351,000 
A)  $408,000 
B)  $273,000 
C)  $331,000 
D)  $351,000

Question 3

Capacity constraints include ________.

Accepted Answer

A)  increased demand of warranty services for a pharmaceutical product 
B)  increased need of display space for a retailer 
C)  decreased demand for a pharmaceutical product 
D)  increased fuel efficiency of cars 
A)  increased demand of warranty services for a pharmaceutical product 
B)  increased need of display space for a retailer 
C)  decreased demand for a pharmaceutical product 
D)  increased fuel efficiency of cars

Question 4

When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

Accepted Answer

A)  $50,000, cost of the old machine 
B)  $20,000, cost of the new machine 
C)  $10,000, selling price of the old machine 
D)  $3,000, annual savings in operating costs if the new machine is purchased 
A)  $50,000, cost of the old machine 
B)  $20,000, cost of the new machine 
C)  $10,000, selling price of the old machine 
D)  $3,000, annual savings in operating costs if the new machine is purchased

Question 5

Planet Design Services, Inc., is considering replacing a machine. The following data are available:
 
Which of the data provided in the table is a sunk cost?

Accepted Answer

A)  the annual cash operating costs of the old machine 
B)  the annual cash operating costs of the replacement machine 
C)  the disposal value of the old machine 
D)  the original cost of the old machine 
A)  the annual cash operating costs of the old machine 
B)  the annual cash operating costs of the replacement machine 
C)  the disposal value of the old machine 
D)  the original cost of the old machine

Question 6

A company is considering adding a fourth product to use available capacity. A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

Accepted Answer

A) True 
 B)False

Question 7

Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows:
 
Crayola Technologies Inc. has contacted Rubium with an offer to sell 6,000 of the subassemblies for $144.00 each. Rubium will eliminate $89,000 of fixed overhead if it accepts the proposal. Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?

Accepted Answer

A)  Buy; savings = $89,000 
B)  Buy; savings = $7,000 
C)  Make; savings = $1,000 
D)  Make; savings = $203,000 
A)  Buy; savings = $89,000 
B)  Buy; savings = $7,000 
C)  Make; savings = $1,000 
D)  Make; savings = $203,000

Question 8

Kinnane's Fine Furniture manufactures two models, Standard and Premium. Weekly demand is estimated to be 106 units of the Standard Model and 74 units of the Premium Model. The following per unit data apply:
 
If there are 495 machine-hours available per week, how many rockers of each model should Kinnane produce to maximize profits?

Accepted Answer

A)  106 units of Standard and 29 units of Premium 
B)  17 units of Standard and 74 units of Premium 
C)  106 units of Standard and 74 units of Premium 
D)  83 units of Standard and 41 units of Premium 
A)  106 units of Standard and 29 units of Premium 
B)  17 units of Standard and 74 units of Premium 
C)  106 units of Standard and 74 units of Premium 
D)  83 units of Standard and 41 units of Premium

Question 9

Kitchens Sales Inc. is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
 
Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $65 per unit. The average marketing cost of Kitchens Sales product is $175 per order. Which of the following costs is NOT considered to calculate the minimum acceptable price of a one-time-only special order?

Accepted Answer

A)  marketing costs 
B)  direct material costs 
C)  indirect material costs 
D)  special design costs 
A)  marketing costs 
B)  direct material costs 
C)  indirect material costs 
D)  special design costs

Question 10

The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the make-or-buy decision ________.

Accepted Answer

A)  incremental revenues are $4 per unit 
B)  incremental costs are $2 per unit 
C)  net relevant costs are $2 per unit 
D)  differential costs are $4 per unit 
A)  incremental revenues are $4 per unit 
B)  incremental costs are $2 per unit 
C)  net relevant costs are $2 per unit 
D)  differential costs are $4 per unit

Question 11

Qualitative factors are important in the decision-making process even though they cannot be measured numerically.

Accepted Answer

A) True 
 B)False

Question 12

Kitchens Sales Inc. is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
 
Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $66 per unit. The average marketing cost of Kitchens Sales product is $173 per order. Other than price, what other items should Kitchens Sales consider before accepting this one-time-only special order?

Accepted Answer

A)  reaction of shareholders 
B)  reaction of existing customers to the lower price offered to Mr. Louis Cifer 
C)  demand for cherry cabinets 
D)  price is the only consideration 
A)  reaction of shareholders 
B)  reaction of existing customers to the lower price offered to Mr. Louis Cifer 
C)  demand for cherry cabinets 
D)  price is the only consideration

Question 13

A. C .Tech Manufacturing Appliances manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below.
 
The maximum machine-hours available are 6,200 per week.
How many of each product should be produced per month using the short-run profit maximizing strategy?

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 14

Employee morale at Dos Santos, Inc., is very high. This type of information is an example of ________.

Accepted Answer

A)  qualitative factors 
B)  quantitative factors 
C)  irrelevant factors 
D)  financial factors 
A)  qualitative factors 
B)  quantitative factors 
C)  irrelevant factors 
D)  financial factors

Question 15

Springer Products manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply:
 
If there is excess capacity, which model is the most profitable to produce?

Accepted Answer

A)  Model X 
B)  Model Y 
C)  Model Z 
D)  Both Model X and Model Y have same and highest profitability 
A)  Model X 
B)  Model Y 
C)  Model Z 
D)  Both Model X and Model Y have same and highest profitability

Question 16

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 17

A relevant revenue is revenue that is a(n) ________.

Accepted Answer

A)  past revenue and differs among alternative courses of action 
B)  future revenue and differs among alternative courses of action 
C)  in-hand revenue 
D)  earned revenue 
A)  past revenue and differs among alternative courses of action 
B)  future revenue and differs among alternative courses of action 
C)  in-hand revenue 
D)  earned revenue

Question 18

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

Accepted Answer

A)  the book value of the old equipment 
B)  the depreciation expense on the old equipment 
C)  the loss on the disposal of the old equipment 
D)  the setup cost of the new equipment 
A)  the book value of the old equipment 
B)  the depreciation expense on the old equipment 
C)  the loss on the disposal of the old equipment 
D)  the setup cost of the new equipment

Question 19

Which of following is a firm's risk of outsourcing the production of a part?

Accepted Answer

A)  fluctuation in the manufacturing costs 
B)  leakage of intellectual property 
C)  increased need of skilled workers 
D)  scarcity of indirect labor 
A)  fluctuation in the manufacturing costs 
B)  leakage of intellectual property 
C)  increased need of skilled workers 
D)  scarcity of indirect labor

Question 20

An example of a qualitative factor for the decision-making process is ________

Accepted Answer

A)  customer satisfaction as determined by written responses given by customers to survey questions 
B)  employee wages paid this week 
C)  number of clicks on a web site during a month 
D)  manufacturing overhead allocated to WIP 
A)  customer satisfaction as determined by written responses given by customers to survey questions 
B)  employee wages paid this week 
C)  number of clicks on a web site during a month 
D)  manufacturing overhead allocated to WIP

Which of the following is an assumption of linear programming?

Capacity constraints include ________.

When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

Planet Design Services, Inc., is considering replacing a machine. The following data are available: Which of the data provided in the table is a sunk cost?

A company is considering adding a fourth product to use available capacity. A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the make-or-buy decision ________.

Qualitative factors are important in the decision-making process even though they cannot be measured numerically.

Employee morale at Dos Santos, Inc., is very high. This type of information is an example of ________.

Springer Products manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: If there is excess capacity, which model is the most profitable to produce?

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

A relevant revenue is revenue that is a(n) ________.

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

Which of following is a firm's risk of outsourcing the production of a part?

An example of a qualitative factor for the decision-making process is ________

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 11: Decision Making and Relevant Information

Which of the following is an assumption of linear programming?

Capacity constraints include ________.

When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

Planet Design Services, Inc., is considering replacing a machine. The following data are available: Which of the data provided in the table is a sunk cost?

A company is considering adding a fourth product to use available capacity. A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the make-or-buy decision ________.

Qualitative factors are important in the decision-making process even though they cannot be measured numerically.

Employee morale at Dos Santos, Inc., is very high. This type of information is an example of ________.

Springer Products manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: If there is excess capacity, which model is the most profitable to produce?

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

A relevant revenue is revenue that is a(n) ________.

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

Which of following is a firm's risk of outsourcing the production of a part?

An example of a qualitative factor for the decision-making process is ________

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters