Question 1

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 2

How much will the company's net operating income be increased or (decreased)if it prices the 1,000 units in the special order at $6 each?

Accepted Answer

A)  ($500)per month. 
B)  $400 per month. 
C)  $1,000 per month. 
D)  $2,500 per month. 
A)  ($500)per month. 
B)  $400 per month. 
C)  $1,000 per month. 
D)  $2,500 per month.

Question 3

Cook Company has two divisions-Eastern and Western.The divisions have the following revenues and expenses:   The management of Cook is considering the elimination of the Eastern Division.If the Eastern Division were eliminated,the direct fixed costs associated with this division could be avoided.However,corporate costs would still be $305,000 in total.Given these data,the elimination of the Eastern Division would result in an overall company net income (loss)of:

Accepted Answer

A)  $15,000. 
B)  ($60,000). 
C)  ($75,000). 
D)  ($155,000). 
A)  $15,000. 
B)  ($60,000). 
C)  ($75,000). 
D)  ($155,000).

Question 4

Kramer Company makes 4,000 units per year of a part called an axial tap for use in one of its products.Data concerning the unit production costs of the axial tap follow:

Accepted Answer

@#IMG-DLM& 
An outside supplier has offered to sel

Question 5

A study has been conducted to determine if one of the departments in Parry Company should be discontinued.The contribution margin in the department is $50,000 per year.Fixed expenses charged to the department are $65,000 per year.It is estimated that $40,000 of these fixed expenses could be eliminated if the department is discontinued.These data indicate that if the department is discontinued,the company's overall net operating income would:

Accepted Answer

A)  decrease by $10,000 per year. 
B)  increase by $10,000 per year. 
C)  decrease by $25,000 per year. 
D)  increase by $25,000 per year. 
A)  decrease by $10,000 per year. 
B)  increase by $10,000 per year. 
C)  decrease by $25,000 per year. 
D)  increase by $25,000 per year.

Question 6

The Hyatt Company is trying to decide whether it should purchase new equipment and continue to make its subassemblies internally or if production should be discontinued and the subassembly purchased from an outside supplier.
New equipment for producing the subassemblies can be purchased at a cost of $400,000.The equipment would have a five-year useful life (the company uses straight-line depreciation)and a $50,000 salvage value.
Alternatively,the subassemblies could be purchased from an outside supplier.The supplier has offered to provide the subassemblies for $9 each under a five-year contract.
Hyatt Company's present costs per unit of producing the subassemblies internally (with the old equipment)are given below.The costs are based on a current activity level of 40,000 subassemblies per year:

Accepted Answer

@#IMG-DLM& 
The new equipment would be more effici

Question 7

If by dropping a product a firm can avoid more in fixed costs than it loses in contribution margin,then the firm is better off economically if the product is dropped.

Accepted Answer

A) True 
 B)False

Question 8

The sunk cost in this situation is:

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $11,200. 
D)  $26,800. 
A)  $0. 
B)  $10,000. 
C)  $11,200. 
D)  $26,800.

Question 9

The opportunity cost of making a component part in a factory with no excess capacity is the:

Accepted Answer

A)  variable manufacturing cost of the component. 
B)  fixed manufacturing cost of the component. 
C)  cost of the production given up in order to manufacture the component. 
D)  net benefit foregone from the best alternative use of the capacity required. 
A)  variable manufacturing cost of the component. 
B)  fixed manufacturing cost of the component. 
C)  cost of the production given up in order to manufacture the component. 
D)  net benefit foregone from the best alternative use of the capacity required.

Question 10

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 11

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 12

(Ignore the time value of money in this problem. )Madison Optometry is considering the purchase of a new lens grinder to replace a machine that was purchased several years ago.Selected information on the two machines is given below:

Accepted Answer

@#IMG-DLM& 
Required:
Compute the total advantage

Question 13

Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs.Of the fixed costs,$21,000 cannot be eliminated.The effect on the profit of Manor Company of discontinuing this department would be:

Accepted Answer

A)  a decrease of $4,000. 
B)  an increase of $4,000. 
C)  a decrease of $25,000. 
D)  an increase of $25,000. 
A)  a decrease of $4,000. 
B)  an increase of $4,000. 
C)  a decrease of $25,000. 
D)  an increase of $25,000.

Question 14

Assume that if the component is purchased from the outside supplier,$35,100 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the component would be rented to another company for $64,800 per year.If Rogers chooses to buy the component from the outside supplier under these circumstances,then the impact on annual net operating income due to accepting the offer would be:

Accepted Answer

A)  $18,900 decrease. 
B)  $18,900 increase. 
C)  $21,400 decrease. 
D)  $21,400 increase. 
A)  $18,900 decrease. 
B)  $18,900 increase. 
C)  $21,400 decrease. 
D)  $21,400 increase.

Question 15

Manico Company produces three products-X,Y,& Z-with the following characteristics:   The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Accepted Answer

A)  Orders for Z first,X second,and Y third. 
B)  Orders for X first,Z second,and Y third. 
C)  Orders for Y first,X second,and Z third. 
D)  Orders for Z first and no orders for X or Y. 
A)  Orders for Z first,X second,and Y third. 
B)  Orders for X first,Z second,and Y third. 
C)  Orders for Y first,X second,and Z third. 
D)  Orders for Z first and no orders for X or Y.

Question 16

Manico Company produces three products-X,Y,& Z-with the following characteristics:   The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Accepted Answer

A)  Orders for Z first,X second,and Y third. 
B)  Orders for X first,Z second,and Y third. 
C)  Orders for Y first,X second,and Z third. 
D)  Orders for Z first and no orders for X or Y. 
A)  Orders for Z first,X second,and Y third. 
B)  Orders for X first,Z second,and Y third. 
C)  Orders for Y first,X second,and Z third. 
D)  Orders for Z first and no orders for X or Y.

Question 17

Opportunity costs are recorded in the accounts of an organization.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that regular sales of jigs total 85,000 units per month.All other conditions remain the same.If Immanuel accepts the special order,the change in monthly operating income will be?

Accepted Answer

A)  $3,600 decrease. 
B)  $5,400 decrease. 
C)  $7,200 increase. 
D)  $14,400 increase. 
A)  $3,600 decrease. 
B)  $5,400 decrease. 
C)  $7,200 increase. 
D)  $14,400 increase.

Question 19

What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 40,000 units required each year?

Accepted Answer

A)  $6.60. 
B)  $44.60. 
C)  $59.90. 
D)  $66.50. 
A)  $6.60. 
B)  $44.60. 
C)  $59.90. 
D)  $66.50.

Question 20

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.

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

How much will the company's net operating income be increased or (decreased)if it prices the 1,000 units in the special order at $6 each?

Kramer Company makes 4,000 units per year of a part called an axial tap for use in one of its products.Data concerning the unit production costs of the axial tap follow:

If by dropping a product a firm can avoid more in fixed costs than it loses in contribution margin,then the firm is better off economically if the product is dropped.

The sunk cost in this situation is:

The opportunity cost of making a component part in a factory with no excess capacity is the:

Costs that are always relevant in decision-making are:

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

(Ignore the time value of money in this problem. )Madison Optometry is considering the purchase of a new lens grinder to replace a machine that was purchased several years ago.Selected information on the two machines is given below:

Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs.Of the fixed costs,$21,000 cannot be eliminated.The effect on the profit of Manor Company of discontinuing this department would be:

Manico Company produces three products-X,Y,& Z-with the following characteristics: The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Manico Company produces three products-X,Y,& Z-with the following characteristics: The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Opportunity costs are recorded in the accounts of an organization.

Suppose that regular sales of jigs total 85,000 units per month.All other conditions remain the same.If Immanuel accepts the special order,the change in monthly operating income will be?

What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 40,000 units required each year?

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

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Exam 9: Flexible Budgets and Overhead Analysis

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

How much will the company's net operating income be increased or (decreased)if it prices the 1,000 units in the special order at $6 each?

Kramer Company makes 4,000 units per year of a part called an axial tap for use in one of its products.Data concerning the unit production costs of the axial tap follow:

If by dropping a product a firm can avoid more in fixed costs than it loses in contribution margin,then the firm is better off economically if the product is dropped.

The sunk cost in this situation is:

The opportunity cost of making a component part in a factory with no excess capacity is the:

Costs that are always relevant in decision-making are:

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

(Ignore the time value of money in this problem. )Madison Optometry is considering the purchase of a new lens grinder to replace a machine that was purchased several years ago.Selected information on the two machines is given below:

Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs.Of the fixed costs,$21,000 cannot be eliminated.The effect on the profit of Manor Company of discontinuing this department would be:

Manico Company produces three products-X,Y,& Z-with the following characteristics: The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Manico Company produces three products-X,Y,& Z-with the following characteristics: The company has only 2,000 machine-hours available each month.If demand exceeds the company's capacity,in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Opportunity costs are recorded in the accounts of an organization.

Suppose that regular sales of jigs total 85,000 units per month.All other conditions remain the same.If Immanuel accepts the special order,the change in monthly operating income will be?

What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 40,000 units required each year?

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