Question 1

A plant operating at capacity would suggest that most likely:

Accepted Answer

A)  every machine and person in the plant is working at the maximum possible rate. 
B)  only some specific machines or processes are operating at the maximum rate possible. 
C)  fixed costs will need to change to accommodate increased demand. 
D)  managers should produce those products with the highest contribution margin in order to deal with the constrained resource. 
A)  every machine and person in the plant is working at the maximum possible rate. 
B)  only some specific machines or processes are operating at the maximum rate possible. 
C)  fixed costs will need to change to accommodate increased demand. 
D)  managers should produce those products with the highest contribution margin in order to deal with the constrained resource.

Question 2

The change in the company's overall annual net operating income that would result from making the component,rather than buying it,would be:

Accepted Answer

A)  $14,000 decrease. 
B)  $1,000 decrease. 
C)  $5,000 increase. 
D)  $17,000 increase. 
A)  $14,000 decrease. 
B)  $1,000 decrease. 
C)  $5,000 increase. 
D)  $17,000 increase.

Question 3

Cummings Company has been purchasing bottles for its product at a cost of $50.The cost to produce comparable bottles is expected to be $24 for direct material and $16 for direct labour.If Cummings makes the bottles,fixed overhead cost will not increase and variable factory overhead costs associated with the cases are expected to be 20% of direct materials costs.
Should Cummings make or buy the bottles?

Accepted Answer

Purchase bottles $50.00
Costs

Question 4

Beryl Enterprise is considering closing down its Jamaica location.This location presently has a contribution margin of $1,000,000.Overhead allocated to it is $2,500,000,of which $250,000 cannot be eliminated.If this location were to discontinue operations,by what amount would Beryl's pre-tax income increase?

Accepted Answer

A)  $250,000. 
B)  $1,000,000. 
C)  $1,250,000. 
D)  $1,500,000. 
A)  $250,000. 
B)  $1,000,000. 
C)  $1,250,000. 
D)  $1,500,000.

Question 5

The manufacturing capacity of Jordan Company's facilities is 30,000 units a year.A summary of operating results for last year follows:   A foreign distributor has offered to buy 15,000 units at $90 per unit next year.Jordan expects its regular sales next year to be 18,000 units.If Jordan accepts this offer and rejects some business from regular customers so as not to exceed capacity,what would be the total net operating income next year? (Assume that the total fixed costs would be the same no matter how many units are produced and sold. )

Accepted Answer

A)  $390,000. 
B)  $705,000. 
C)  $840,000. 
D)  $855,000. 
A)  $390,000. 
B)  $705,000. 
C)  $840,000. 
D)  $855,000.

Question 6

What is the lowest selling price per unit among those listed below that could be charged for the new product and still make it economically desirable to add the new product?

Accepted Answer

A)  $222. 
B)  $240. 
C)  $249. 
D)  $291. 
A)  $222. 
B)  $240. 
C)  $249. 
D)  $291.

Question 7

A decision by Cosmo Inc.to close the Town Store would result in a monthly increase (decrease)in Cosmo's operating income of:

Accepted Answer

A)  $(10,800). 
B)  $(6,000). 
C)  $(800). 
D)  $4,000. 
A)  $(10,800). 
B)  $(6,000). 
C)  $(800). 
D)  $4,000.

Question 8

Which of the following is not an effective way of dealing with a production constraint (i.e. ,bottleneck)?

Accepted Answer

A)  Reduce the number of defective units produced at the bottleneck. 
B)  Pay overtime to workers assigned to the bottleneck in the production process. 
C)  Pay overtime to workers assigned to work stations located after the bottleneck in the production process. 
D)  Subcontract work that would otherwise require use of the bottleneck. 
A)  Reduce the number of defective units produced at the bottleneck. 
B)  Pay overtime to workers assigned to the bottleneck in the production process. 
C)  Pay overtime to workers assigned to work stations located after the bottleneck in the production process. 
D)  Subcontract work that would otherwise require use of the bottleneck.

Question 9

Which of the statements below is correct about sunk costs?

Accepted Answer

A)  Sunk costs are always relevant to decision making. 
B)  Sunk costs are not relevant to decision making. 
C)  Sunk costs are relevant to long-run decisions but not to short-run decisions. 
D)  Sunk costs acts as a substitute for opportunity costs. 
A)  Sunk costs are always relevant to decision making. 
B)  Sunk costs are not relevant to decision making. 
C)  Sunk costs are relevant to long-run decisions but not to short-run decisions. 
D)  Sunk costs acts as a substitute for opportunity costs.

Question 10

The Anaconda Mining Company currently is operating at less than 50 percent of practical capacity.The management of the company expects sales to drop below the present level of 15,000 tons of ore per month very soon.The selling price per ton of ore is $2 and the variable cost per ton is $1.Fixed costs per month total $15,000.
Management is concerned that a further drop in sales volume will generate a loss and,accordingly,is considering the temporary suspension of operations until demand in the metals markets returns to normal levels and prices rebound.Management has implemented a cost reduction program over the past year that has been successful in reducing costs.Nevertheless,suspension of operations appears to be the only viable alternative.Management estimates that suspension of operations would reduce fixed costs from $15,000 to $5,000 per month.
Required:
a.Why does management estimate that fixed costs will persist at $5,000 per month even though the mine is temporarily closed?
b.At what sales volume should management suspend operations at the mine?

Accepted Answer

a.Some fixed costs will continue to incu

Question 11

Suppose the company is already operating at capacity when the special order is received from the overseas customer.What would be the opportunity cost of each unit delivered to the overseas customer?

Accepted Answer

A)  $7.20. 
B)  $8.40. 
C)  $9.70. 
D)  $32.50. 
A)  $7.20. 
B)  $8.40. 
C)  $9.70. 
D)  $32.50.

Question 12

A study has been conducted to determine if Product A should be dropped.Sales of the product total $200,000 per year;variable expenses total $140,000 per year.Fixed expenses charged to the product total $90,000 per year.The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped.These data indicate that if Product A is dropped,the company's overall net operating income would:

Accepted Answer

A)  decrease by $10,000 per year. 
B)  increase by $20,000 per year. 
C)  decrease by $20,000 per year. 
D)  increase by $30,000 per year. 
A)  decrease by $10,000 per year. 
B)  increase by $20,000 per year. 
C)  decrease by $20,000 per year. 
D)  increase by $30,000 per year.

Question 13

The cost of a resource that has no alternative use in a make or buy decision problem has an opportunity cost of zero.

Accepted Answer

A) True 
 B)False

Question 14

Juett Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 70,000 units per month is as follows:

Accepted Answer

@#IMG-DLM& 
The normal selling price of the produc

Question 15

If Varone has an opportunity to sell 37,960 Homs next year through regular channels and the special order is accepted for 15% off the regular selling price,the effect on net operating income next year due to accepting this order would be a:

Accepted Answer

A)  $33,320 decrease. 
B)  $33,320 increase. 
C)  $35,480 decrease. 
D)  $35,480 increase. 
A)  $33,320 decrease. 
B)  $33,320 increase. 
C)  $35,480 decrease. 
D)  $35,480 increase.

Question 16

In deciding the profitability of processing joint products further after the split-off point,all costs should be considered including joint costs incurred prior to the split-off point.

Accepted Answer

A) True 
 B)False

Question 17

Assume that discontinuing the manufacture and sale of Tams will have no effect on the sale of other product lines.If the company discontinues the Tam product line,the change in annual operating income (or loss)should be:

Accepted Answer

A)  $55,000 decrease. 
B)  $65,000 decrease. 
C)  $90,000 decrease. 
D)  $70,000 increase. 
A)  $55,000 decrease. 
B)  $65,000 decrease. 
C)  $90,000 decrease. 
D)  $70,000 increase.

Question 18

A plant operating at capacity would suggest that most likely:

Accepted Answer

A)  every machine and person in the plant is working at the maximum possible rate. 
B)  only some specific machines or processes are operating at the maximum rate possible. 
C)  fixed costs will need to change to accommodate increased demand. 
D)  managers should produce those products with the highest contribution margin in order to deal with the constrained resource. 
A)  every machine and person in the plant is working at the maximum possible rate. 
B)  only some specific machines or processes are operating at the maximum rate possible. 
C)  fixed costs will need to change to accommodate increased demand. 
D)  managers should produce those products with the highest contribution margin in order to deal with the constrained resource.

Question 19

Which of the following is one of the advantages to the target costing approach?

Accepted Answer

A)  In the target costing approach,costs are fully known before the product is actually designed. 
B)  There is usually a higher level of cost-consciousness in the target costing approach than in the cost plus approach. 
C)  The target costing approach approach often leads to higher levels of features included that some customers may want. 
D)  The target costing approach can be completed by marketing department personnel without involving others in the process. 
A)  In the target costing approach,costs are fully known before the product is actually designed. 
B)  There is usually a higher level of cost-consciousness in the target costing approach than in the cost plus approach. 
C)  The target costing approach approach often leads to higher levels of features included that some customers may want. 
D)  The target costing approach can be completed by marketing department personnel without involving others in the process.

Question 20

The split-off point is the stage in production of joint products at which the different end products are identified.

Accepted Answer

A) True 
 B)False

A plant operating at capacity would suggest that most likely:

The change in the company's overall annual net operating income that would result from making the component,rather than buying it,would be:

What is the lowest selling price per unit among those listed below that could be charged for the new product and still make it economically desirable to add the new product?

A decision by Cosmo Inc.to close the Town Store would result in a monthly increase (decrease)in Cosmo's operating income of:

Which of the following is not an effective way of dealing with a production constraint (i.e. ,bottleneck)?

Which of the statements below is correct about sunk costs?

Suppose the company is already operating at capacity when the special order is received from the overseas customer.What would be the opportunity cost of each unit delivered to the overseas customer?

The cost of a resource that has no alternative use in a make or buy decision problem has an opportunity cost of zero.

Juett Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 70,000 units per month is as follows:

If Varone has an opportunity to sell 37,960 Homs next year through regular channels and the special order is accepted for 15% off the regular selling price,the effect on net operating income next year due to accepting this order would be a:

In deciding the profitability of processing joint products further after the split-off point,all costs should be considered including joint costs incurred prior to the split-off point.

Assume that discontinuing the manufacture and sale of Tams will have no effect on the sale of other product lines.If the company discontinues the Tam product line,the change in annual operating income (or loss)should be:

A plant operating at capacity would suggest that most likely:

Which of the following is one of the advantages to the target costing approach?

The split-off point is the stage in production of joint products at which the different end products are identified.

An Introduction to Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Activity-Based Costing

Systems Design: Process Costing

Cost Behavior: Analysis and Use

Cost-Volume-Profit Relationships

Profit Planning

Standard Costs

Decentralization

Relevant Costs for Decision Making

Capital Budgeting Decisions

How Well Am I Doing Statement of Cash Flows

How Well Am I Doing Financial Statement Analysis

Filters

Exam 9: Flexible Budgets and Overhead Analysis

A plant operating at capacity would suggest that most likely:

The change in the company's overall annual net operating income that would result from making the component,rather than buying it,would be:

What is the lowest selling price per unit among those listed below that could be charged for the new product and still make it economically desirable to add the new product?

A decision by Cosmo Inc.to close the Town Store would result in a monthly increase (decrease)in Cosmo's operating income of:

Which of the following is not an effective way of dealing with a production constraint (i.e. ,bottleneck)?

Which of the statements below is correct about sunk costs?

Suppose the company is already operating at capacity when the special order is received from the overseas customer.What would be the opportunity cost of each unit delivered to the overseas customer?

The cost of a resource that has no alternative use in a make or buy decision problem has an opportunity cost of zero.

Juett Company produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 70,000 units per month is as follows:

If Varone has an opportunity to sell 37,960 Homs next year through regular channels and the special order is accepted for 15% off the regular selling price,the effect on net operating income next year due to accepting this order would be a:

In deciding the profitability of processing joint products further after the split-off point,all costs should be considered including joint costs incurred prior to the split-off point.

Assume that discontinuing the manufacture and sale of Tams will have no effect on the sale of other product lines.If the company discontinues the Tam product line,the change in annual operating income (or loss)should be:

A plant operating at capacity would suggest that most likely:

Which of the following is one of the advantages to the target costing approach?

The split-off point is the stage in production of joint products at which the different end products are identified.

An Introduction to Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Activity-Based Costing

Systems Design: Process Costing

Cost Behavior: Analysis and Use

Cost-Volume-Profit Relationships

Profit Planning

Standard Costs

Decentralization

Relevant Costs for Decision Making

Capital Budgeting Decisions

How Well Am I Doing Statement of Cash Flows

How Well Am I Doing Financial Statement Analysis

Filters