Question 1

The book value of old equipment is not a relevant cost in an equipment replacement decision problem.

Accepted Answer

A) True 
 B)False

Question 2

The following standard costs pertain to a component part manufactured by Ashby Company:   The company can purchase the part from an outside supplier for $25 per unit.The manufacturing overhead is 60% fixed and this fixed portion would not be affected by this decision.Assume that direct labour is an avoidable cost in this decision.What is the relevant amount of the standard cost per unit to be considered in a decision of whether to make the part internally or buy it from the external supplier?

Accepted Answer

A)  $2. 
B)  $15 
C)  $19. 
D)  $27. 
A)  $2. 
B)  $15 
C)  $19. 
D)  $27.

Question 3

SP Company makes 40,000 motors to be used in the production of its sewing machines.The average cost per motor at this level of activity is:   An outside supplier recently began producing a comparable motor that could be used in the sewing machine.The price offered to SP Company for this motor is $18.If SP Company decides not to make the motors,there would be no other use for the production facilities and total fixed factory overhead costs would not change.If SP Company decides to continue making the motor,how much higher or lower would net income be than if the motors are purchased from the outside suppler? Assume that direct labour is a variable cost in this company.

Accepted Answer

A)  $86,000 higher. 
B)  $92,000 lower. 
C)  $178,000 higher. 
D)  $276,000 higher. 
A)  $86,000 higher. 
B)  $92,000 lower. 
C)  $178,000 higher. 
D)  $276,000 higher.

Question 4

Managers should pay little attention to bottleneck operations since they have limited capacity for producing output.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Holt Company makes three products in a single facility.Data concerning these products follow:

Accepted Answer

@#IMG-DLM& 
The mixing machines are potentially th

Question 7

How many minutes of grinding machine time would be required to satisfy demand for all four products?

Accepted Answer

A)  10,500 minutes. 
B)  10,700 minutes. 
C)  10,800 minutes. 
D)  11,000 minutes. 
A)  10,500 minutes. 
B)  10,700 minutes. 
C)  10,800 minutes. 
D)  11,000 minutes.

Question 8

What is the net advantage or disadvantage to the company from upgrading the calculators?

Accepted Answer

A)  $8,000 disadvantage. 
B)  $8,800 advantage. 
C)  $18,000 disadvantage. 
D)  $20,000 advantage. 
A)  $8,000 disadvantage. 
B)  $8,800 advantage. 
C)  $18,000 disadvantage. 
D)  $20,000 advantage.

Question 9

Cosmo is considering a promotional campaign at the Town Store that would not affect the Mall Store.Increasing annual promotional expenses at the Town Store by $60,000 in order to increase Town Store sales by ten percent would result in a monthly increase (decrease)in Cosmo's operating income of:

Accepted Answer

A)  $(16,800). 
B)  $(1,400). 
C)  $3,400. 
D)  $7,000. 
A)  $(16,800). 
B)  $(1,400). 
C)  $3,400. 
D)  $7,000.

Question 10

Up to how much should the company be willing to pay for one additional hour of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent. )

Accepted Answer

A)  $0.00. 
B)  $10.60. 
C)  $19.25. 
D)  $21.90. 
A)  $0.00. 
B)  $10.60. 
C)  $19.25. 
D)  $21.90.

Question 11

Assume that Tolar decides to upgrade the calculators.At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

Accepted Answer

A)  $8. 
B)  $30. 
C)  $53. 
D)  $67. 
A)  $8. 
B)  $30. 
C)  $53. 
D)  $67.

Question 12

Wagner Company sells product A for $21 per unit.Wagner's unit product cost based on the full capacity of 200,000 units is as follows:   A special order offering to buy 20,000 units has been received from a foreign distributor.The only selling costs that would be incurred on this order would be $3 per unit for shipping.Wagner has sufficient idle capacity to manufacture the additional units.Two-thirds of the manufacturing overhead is fixed and would not be affected by this order.Assume that direct labour is an avoidable cost in this decision.In negotiating a price for the special order,the minimum acceptable selling price per unit should be:

Accepted Answer

A)  $14. 
B)  $15. 
C)  $16. 
D)  $18. 
A)  $14. 
B)  $15. 
C)  $16. 
D)  $18.

Question 13

Assume that discontinuing the Tam product would result in a $120,000 increase in the contribution margin of other product lines.How many Tams would have to be sold next year for the company to be as well off as if it just dropped the line and enjoyed the increase in contribution margin from other products?

Accepted Answer

A)  5,000 units. 
B)  6,000 units. 
C)  6,500 units. 
D)  7,000 units. 
A)  5,000 units. 
B)  6,000 units. 
C)  6,500 units. 
D)  7,000 units.

Question 14

A sunk cost is a cost that has already been incurred and that cannot be avoided regardless of what action is chosen.

Accepted Answer

A) True 
 B)False

Question 15

Opportunity costs are recorded in the accounts of an organization.

Accepted Answer

A) True 
 B)False

Question 16

Costs that are always relevant in decision-making are:

Accepted Answer

A)  future costs. 
B)  avoidable costs. 
C)  sunk costs. 
D)  fixed costs. 
A)  future costs. 
B)  avoidable costs. 
C)  sunk costs. 
D)  fixed costs.

Question 17

Managers will always seek to eliminate all unprofitable product lines.

Accepted Answer

A) True 
 B)False

Question 18

Which of the statements below is correct about opportunity costs?

Accepted Answer

A)  Always relevant to decision making. 
B)  Always the same as variable cost. 
C)  An important consideration used for decision making. 
D)  All of these answers are correct. 
A)  Always relevant to decision making. 
B)  Always the same as variable cost. 
C)  An important consideration used for decision making. 
D)  All of these answers are correct.

Question 19

Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 700 units for regular customers.The minimum acceptable price per unit for the special order is closest to:

Accepted Answer

A)  $63.78. 
B)  $69.10. 
C)  $78.90. 
D)  $86.10. 
A)  $63.78. 
B)  $69.10. 
C)  $78.90. 
D)  $86.10.

Question 20

The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a manufacturing cost of $20,000.If the lanterns are remachined for $5,000,they could be sold for $9,000.Alternatively,the lanterns could be sold for scrap for $1,000.Which alternative is more desirable and what are the total relevant costs for that alternative?

Accepted Answer

A)  Remachine and $5,000. 
B)  Remachine and $25,000. 
C)  Scrap and $1,000. 
D)  Scrap and $21,000. 
A)  Remachine and $5,000. 
B)  Remachine and $25,000. 
C)  Scrap and $1,000. 
D)  Scrap and $21,000.

The book value of old equipment is not a relevant cost in an equipment replacement decision problem.

Managers should pay little attention to bottleneck operations since they have limited capacity for producing output.

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

Holt Company makes three products in a single facility.Data concerning these products follow:

How many minutes of grinding machine time would be required to satisfy demand for all four products?

What is the net advantage or disadvantage to the company from upgrading the calculators?

Cosmo is considering a promotional campaign at the Town Store that would not affect the Mall Store.Increasing annual promotional expenses at the Town Store by $60,000 in order to increase Town Store sales by ten percent would result in a monthly increase (decrease)in Cosmo's operating income of:

Up to how much should the company be willing to pay for one additional hour of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent. )

Assume that Tolar decides to upgrade the calculators.At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

A sunk cost is a cost that has already been incurred and that cannot be avoided regardless of what action is chosen.

Opportunity costs are recorded in the accounts of an organization.

Costs that are always relevant in decision-making are:

Managers will always seek to eliminate all unprofitable product lines.

Which of the statements below is correct about opportunity costs?

Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 700 units for regular customers.The minimum acceptable price per unit for the special order is closest to:

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

The book value of old equipment is not a relevant cost in an equipment replacement decision problem.

Managers should pay little attention to bottleneck operations since they have limited capacity for producing output.

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

Holt Company makes three products in a single facility.Data concerning these products follow:

How many minutes of grinding machine time would be required to satisfy demand for all four products?

What is the net advantage or disadvantage to the company from upgrading the calculators?

Cosmo is considering a promotional campaign at the Town Store that would not affect the Mall Store.Increasing annual promotional expenses at the Town Store by $60,000 in order to increase Town Store sales by ten percent would result in a monthly increase (decrease)in Cosmo's operating income of:

Up to how much should the company be willing to pay for one additional hour of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round off to the nearest whole cent. )

Assume that Tolar decides to upgrade the calculators.At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

A sunk cost is a cost that has already been incurred and that cannot be avoided regardless of what action is chosen.

Opportunity costs are recorded in the accounts of an organization.

Costs that are always relevant in decision-making are:

Managers will always seek to eliminate all unprofitable product lines.

Which of the statements below is correct about opportunity costs?

Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 700 units for regular customers.The minimum acceptable price per unit for the special order is closest to:

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