Question 1

The formal process of choosing between alternatives is known as a(n) ________.

Accepted Answer

A)  relevant model 
B)  decision model 
C)  alternative model 
D)  prediction model 
A)  relevant model 
B)  decision model 
C)  alternative model 
D)  prediction model

Question 2

Which of the following are potential problems managers face in relevant-cost analysis?

Accepted Answer

A)  Including only relevant costs and relevant revenues in an analysis 
B)  incorrect assumptions such as all variable costs are relevant and all fixed costs are not 
C)  considering past historical costs when making predictions about future costs 
D)  examining differences in expected total future revenues and expected total future costs among alternatives 
A)  Including only relevant costs and relevant revenues in an analysis 
B)  incorrect assumptions such as all variable costs are relevant and all fixed costs are not 
C)  considering past historical costs when making predictions about future costs 
D)  examining differences in expected total future revenues and expected total future costs among alternatives

Question 3

Throughput margin is equal to revenues minus direct materials and direct labor of the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 4

Past costs themselves are always irrelevant when making decisions.

Accepted Answer

A) True 
 B)False

Question 5

If a company does not use one of its limited resources in the best possible way, the lost contribution to income could be called a(n) ________.

Accepted Answer

A)  business function cost 
B)  carrying cost 
C)  opportunity cost 
D)  sunk cost 
A)  business function cost 
B)  carrying cost 
C)  opportunity cost 
D)  sunk cost

Question 6

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:
 
How can Lisa Dynondo encourage her salespeople to promote the more profitable model?

Accepted Answer

A)  Put all sales persons on fixed salary. 
B)  Provide higher sales commissions for higher priced items. 
C)  Provide higher sales commissions for items with the greatest contribution margin per constrained resource. 
D)  Provide higher sales commissions for items which has the lowest cost and lower sales commissions for items with highest cost. 
A)  Put all sales persons on fixed salary. 
B)  Provide higher sales commissions for higher priced items. 
C)  Provide higher sales commissions for items with the greatest contribution margin per constrained resource. 
D)  Provide higher sales commissions for items which has the lowest cost and lower sales commissions for items with highest cost.

Question 7

Pat, a Pizzeria manager, replaced the convection oven just six months ago. Today, Turbo Ovens Manufacturing announced the availability of a new convection oven that cooks more quickly with lower operating expenses. Pat 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 5 years assuming the Pizzeria purchases the new convection oven?
d.What other items should Pat, as manager of the Pizzeria, consider when making this decision?

Accepted Answer

a.Sunk costs include the original cost o

Question 8

An incremental cost is

Accepted Answer

A)  an additional total cost for an activity 
B)  a cost that has already been incurred 
C)  the difference in total costs between two alternatives 
D)  always related to fixed costs 
A)  an additional total cost for an activity 
B)  a cost that has already been incurred 
C)  the difference in total costs between two alternatives 
D)  always related to fixed costs

Question 9

Explain what revenues and costs are relevant when choosing among alternatives.

Accepted Answer

Future amounts that differ among alterna

Question 10

A mathematical inequality or equality that must be appeased is known as a(n) ________.

Accepted Answer

A)  objective function 
B)  constraint 
C)  operating policy 
D)  business function 
A)  objective function 
B)  constraint 
C)  operating policy 
D)  business function

Question 11

The theory of constraints (TOC) defines throughput margin as ________.

Accepted Answer

A)  operating income minus the direct material costs of the goods sold 
B)  operating income minus the direct labor costs of the goods sold 
C)  revenues minus the direct material costs of the goods sold 
D)  revenues minus the full costs of the goods sold 
A)  operating income minus the direct material costs of the goods sold 
B)  operating income minus the direct labor costs of the goods sold 
C)  revenues minus the direct material costs of the goods sold 
D)  revenues minus the full costs of the goods sold

Question 12

For make-or-buy decisions, a supplier's ability to maintain secrecy of intellectual property is considered a(n) ________.

Accepted Answer

A)  qualitative factor 
B)  irrelevant cost 
C)  differential factor 
D)  opportunity cost 
A)  qualitative factor 
B)  irrelevant cost 
C)  differential factor 
D)  opportunity cost

Question 13

Under the opportunity cost approach, the cost of each alternative includes the incremental costs and the opportunity cost.

Accepted Answer

A) True 
 B)False

Question 14

Kinnane's Fine Furniture manufactures two models, Standard and Premium. Weekly demand is estimated to be 100 units of the Standard Model and 77 units of the Premium Model. The following per unit data apply:
 
The contribution per machine-hour is ________.

Accepted Answer

A)  $24 for Standard, $24 for Premium 
B)  $144 for Standard, $144 for Premium 
C)  $18 for Standard, $18 for Premium 
D)  $4 for Standard, $4 for Premium 
A)  $24 for Standard, $24 for Premium 
B)  $144 for Standard, $144 for Premium 
C)  $18 for Standard, $18 for Premium 
D)  $4 for Standard, $4 for Premium

Question 15

Which of the following is an irrelevant cost when considering where to drop a customer?

Accepted Answer

A)  cost of goods sold 
B)  marketing support 
C)  depreciation 
D)  sales order and delivery processing 
A)  cost of goods sold 
B)  marketing support 
C)  depreciation 
D)  sales order and delivery processing

Question 16

Dantley's Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $240 per table, consisting of 75% variable costs and 25% fixed costs. The company has surplus capacity available. It is Back Forrest's policy to add a 45% markup to full costs. A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Dantley's Furniture Incorporated is invited to submit a bid to the hotel chain. What is the lowest price per unit Dantley's Furniture should bid on this long-term order?

Accepted Answer

A)  $168 
B)  $180 
C)  $240 
D)  $348 
A)  $168 
B)  $180 
C)  $240 
D)  $348

Question 17

John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $10,000 to make it road worthy again. His wife, Sherry, suggested that he should buy a 5-year-old used Jeep Grand Cherokee instead for $10,000 cash. Sherry estimated the following costs for the two cars:
 
The cost NOT relevant for this decision is the ________.

Accepted Answer

A)  acquisition cost of the Trail Blazer 
B)  acquisition cost of the Grand Cherokee 
C)  repairs to the Trail Blazer 
D)  annual operating costs of the Grand Cherokee 
A)  acquisition cost of the Trail Blazer 
B)  acquisition cost of the Grand Cherokee 
C)  repairs to the Trail Blazer 
D)  annual operating costs of the Grand Cherokee

Question 18

Variable cost per unit is the best product cost to use for one-time-only special order decisions.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an example of sunk costs?

Accepted Answer

A)  wages to security staffs 
B)  cost of purchasing raw materials 
C)  cost of an alternative investment 
D)  wages payable to skilled laborers to make a product 
A)  wages to security staffs 
B)  cost of purchasing raw materials 
C)  cost of an alternative investment 
D)  wages payable to skilled laborers to make a product

Question 20

Opportunity costs is defined as ________.

Accepted Answer

A)  the cost of manufacturing a one-time-only special order when a firm has excess capacity to make more products 
B)  the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use 
C)  the sum of variable and fixed costs in a particular business function of the value chain, such as manufacturing costs or marketing costs 
D)  the sum of variable and fixed costs in all business functions of the value chain, such as manufacturing costs or marketing costs 
A)  the cost of manufacturing a one-time-only special order when a firm has excess capacity to make more products 
B)  the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use 
C)  the sum of variable and fixed costs in a particular business function of the value chain, such as manufacturing costs or marketing costs 
D)  the sum of variable and fixed costs in all business functions of the value chain, such as manufacturing costs or marketing costs

The formal process of choosing between alternatives is known as a(n) ________.

Which of the following are potential problems managers face in relevant-cost analysis?

Throughput margin is equal to revenues minus direct materials and direct labor of the cost of goods sold.

Past costs themselves are always irrelevant when making decisions.

If a company does not use one of its limited resources in the best possible way, the lost contribution to income could be called a(n) ________.

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: How can Lisa Dynondo encourage her salespeople to promote the more profitable model?

An incremental cost is

Explain what revenues and costs are relevant when choosing among alternatives.

A mathematical inequality or equality that must be appeased is known as a(n) ________.

The theory of constraints (TOC) defines throughput margin as ________.

For make-or-buy decisions, a supplier's ability to maintain secrecy of intellectual property is considered a(n) ________.

Under the opportunity cost approach, the cost of each alternative includes the incremental costs and the opportunity cost.

Kinnane's Fine Furniture manufactures two models, Standard and Premium. Weekly demand is estimated to be 100 units of the Standard Model and 77 units of the Premium Model. The following per unit data apply: The contribution per machine-hour is ________.

Which of the following is an irrelevant cost when considering where to drop a customer?

Variable cost per unit is the best product cost to use for one-time-only special order decisions.

Which of the following is an example of sunk costs?

Opportunity costs is defined as ________.

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

The formal process of choosing between alternatives is known as a(n) ________.

Which of the following are potential problems managers face in relevant-cost analysis?

Throughput margin is equal to revenues minus direct materials and direct labor of the cost of goods sold.

Past costs themselves are always irrelevant when making decisions.

If a company does not use one of its limited resources in the best possible way, the lost contribution to income could be called a(n) ________.

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: How can Lisa Dynondo encourage her salespeople to promote the more profitable model?

An incremental cost is

Explain what revenues and costs are relevant when choosing among alternatives.

A mathematical inequality or equality that must be appeased is known as a(n) ________.

The theory of constraints (TOC) defines throughput margin as ________.

For make-or-buy decisions, a supplier's ability to maintain secrecy of intellectual property is considered a(n) ________.

Under the opportunity cost approach, the cost of each alternative includes the incremental costs and the opportunity cost.

Kinnane's Fine Furniture manufactures two models, Standard and Premium. Weekly demand is estimated to be 100 units of the Standard Model and 77 units of the Premium Model. The following per unit data apply: The contribution per machine-hour is ________.

Which of the following is an irrelevant cost when considering where to drop a customer?

Variable cost per unit is the best product cost to use for one-time-only special order decisions.

Which of the following is an example of sunk costs?

Opportunity costs is defined as ________.

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