Question 1

The two inequality functions above are:

Accepted Answer

A) Contribution margin functions. 
B) Shadow points. 
C) Objective function coefficients. 
D) Resource constraints. 
E) Sensitivity functions. 
A) Contribution margin functions. 
B) Shadow points. 
C) Objective function coefficients. 
D) Resource constraints. 
E) Sensitivity functions.

Question 2

Motor Corp. manufactures machine parts for boat engines. The CEO, James Hamilton, was considering an offer from a subcontractor who would provide 3,000 units of product AB100 for Hamilton for a price of $230,000. If Motor Corp. does not purchase these parts from the subcontractor it must produce them in-house with the following per-unit costs:   In addition to the above costs, if Hamilton produces part AB100, he would also have a retooling and design cost of $10,000. Should Motor Corp. accept the offer from the subcontractor?

Accepted Answer

Answer may vary
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Question 3

The contribution margin per machine hour is calculated as:

Accepted Answer

A) Full cost per unit ÷ number of machine-hours per unit. 
B) Number of machine-hours per unit ÷ full-cost per unit. 
C) Selling price per unit less variable manufacturing cost per unit. 
D) Selling price per unit less variable manufacturing cost per unit less variable selling cost per machine-hour. 
E) Selling price per unit less total variable cost per unit, divided by number of machine-hours per unit. 
A) Full cost per unit ÷ number of machine-hours per unit. 
B) Number of machine-hours per unit ÷ full-cost per unit. 
C) Selling price per unit less variable manufacturing cost per unit. 
D) Selling price per unit less variable manufacturing cost per unit less variable selling cost per machine-hour. 
E) Selling price per unit less total variable cost per unit, divided by number of machine-hours per unit.

Question 4

Quinta Inc. manufactures machine parts for aircraft engines. The CEO is considering an offer from a subcontractor who would provide 2,800 units of product QR128 for a price of $190,000. If Quinta does not purchase these parts from the subcontractor it must produce them in-house with the following costs:   In addition to the above costs, if Quinta produces part QR128, there would also be a retooling and design cost of $13,000. Should Quinta Inc. accept the offer from the subcontractor?

Accepted Answer

Answer may vary
Feedback: No,

Question 5

Plainfield Company manufactures part G for use in its production cycle. The costs per unit for 10,000 units of part G are as follows:   Verona Company has offered to sell Plainfield 10,000 units of part G for $30 per unit. If Plainfield accepts Verona's offer, the released facilities could be used to save $45,000 in relevant costs in the manufacture of part H. In addition, $5 per unit of the fixed overhead applied to part G would be totally eliminated. What alternative is more desirable and by what amount?

Accepted Answer

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

Question 6

The make-or-buy decision can apply to decisions about all of the following except:

Accepted Answer

A) Internal auditing. 
B) Security. 
C) Human resource management. 
D) Maintenance and repair. 
E) Strategic management. 
A) Internal auditing. 
B) Security. 
C) Human resource management. 
D) Maintenance and repair. 
E) Strategic management.

Question 7

Quirch Inc. manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor who would provide 2,400 units of product PQ107 for Valters for a price of $150,000. If Quirch does not purchase these parts from the subcontractor it must produce them in-house with the following costs:   In addition to the above costs, if Quirch produces part PQ107, it would also have a retooling and design cost of $9,800. The relevant costs of producing 2,400 units of product PQ107 are:

Accepted Answer

A) $149,000. 
B) $129,800. 
C) $150,000. 
D) $164,200. 
E) $148,300. 
A) $149,000. 
B) $129,800. 
C) $150,000. 
D) $164,200. 
E) $148,300.

Question 8

Relevant costs in a make-vs.-buy decision of a part include:

Accepted Answer

A) Corporate headquarter costs that will be allocated differently depending on the decision option chosen. 
B) Setup overhead costs for the manufacture of the product using the outsourced part. 
C) Currently used manufacturing capacity that has alternative uses if the part is outsourced. 
D) Factory-related insurance cost. 
E) Corporate (i.e., headquarter) salaries. 
A) Corporate headquarter costs that will be allocated differently depending on the decision option chosen. 
B) Setup overhead costs for the manufacture of the product using the outsourced part. 
C) Currently used manufacturing capacity that has alternative uses if the part is outsourced. 
D) Factory-related insurance cost. 
E) Corporate (i.e., headquarter) salaries.

Question 9

Sensitivity analysis in linear programming is used to:

Accepted Answer

A) Determine the degree that the constraints vary. 
B) Test the accuracy of the parameters. 
C) Develop the technical matrix. 
D) Determine how the optimal decision would react to changes in parameters. 
E) Develop objective function coefficients. 
A) Determine the degree that the constraints vary. 
B) Test the accuracy of the parameters. 
C) Develop the technical matrix. 
D) Determine how the optimal decision would react to changes in parameters. 
E) Develop objective function coefficients.

Question 10

Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed overhead applied will continue regardless of which decision is made. The following information is available: Cost to Kingston to make the part:   In deciding whether to make or buy the part, Kingston's total relevant costs to make the part are:

Accepted Answer

A) $342,000. 
B) $480,000 
C) $530,000. 
D) $570,000. 
E) Some other amount. 
A) $342,000. 
B) $480,000 
C) $530,000. 
D) $570,000. 
E) Some other amount.

Question 11

In a sell-or-process-further decision, joint production costs:

Accepted Answer

A) Are irrelevant to the decision. 
B) Should be allocated to outputs on the basis of relative sales dollars. 
C) Should be allocated to outputs on the basis of relative physical units. 
D) Cannot be allocated to products for financial reporting purposes. 
E) Usually are traceable to individual products/outputs. 
A) Are irrelevant to the decision. 
B) Should be allocated to outputs on the basis of relative sales dollars. 
C) Should be allocated to outputs on the basis of relative physical units. 
D) Cannot be allocated to products for financial reporting purposes. 
E) Usually are traceable to individual products/outputs.

Question 12

Opportunity costs:

Accepted Answer

A) Result in a cash outlay. 
B) Unless zero are always relevant for decision making. 
C) Should be maximized for the best decision. 
D) Are recorded in the accounting records. 
E) Are the result of a completed event or transaction. 
A) Result in a cash outlay. 
B) Unless zero are always relevant for decision making. 
C) Should be maximized for the best decision. 
D) Are recorded in the accounting records. 
E) Are the result of a completed event or transaction.

Question 13

A company's approach to a make-or-buy decision:

Accepted Answer

A) Depends on whether the company is operating at or below the breakeven point. 
B) Depends on whether the company is operating at or below normal volume. 
C) Involves an analysis of avoidable costs. 
D) Should utilize absorption (i.e., full) costing. 
E) Should consider an allocation of corporate headquarter expenses to the unit in question. 
A) Depends on whether the company is operating at or below the breakeven point. 
B) Depends on whether the company is operating at or below normal volume. 
C) Involves an analysis of avoidable costs. 
D) Should utilize absorption (i.e., full) costing. 
E) Should consider an allocation of corporate headquarter expenses to the unit in question.

Question 14

The shadow price in a linear programming model is:

Accepted Answer

A) Interesting from a mathematical standpoint, but not useful from an accounting standpoint. 
B) Equal to the current market price for an additional unit of the related resource. 
C) The price one would be willing to pay for an additional unit of the scarce resource. 
D) Greater than the market price for the related resource. 
E) Zero for a binding constraint. 
A) Interesting from a mathematical standpoint, but not useful from an accounting standpoint. 
B) Equal to the current market price for an additional unit of the related resource. 
C) The price one would be willing to pay for an additional unit of the scarce resource. 
D) Greater than the market price for the related resource. 
E) Zero for a binding constraint.

Question 15

Which of the following items does NOT have to be considered when evaluating a make-or-buy decision?

Accepted Answer

A) The reliability of the supplier's delivery schedule. 
B) Quality of the supplier's product. 
C) Net book value of the production equipment used to make the item in question. 
D) Contribution margin generated by an alternative use of the production equipment. 
E) Financial stability of the supplier. 
A) The reliability of the supplier's delivery schedule. 
B) Quality of the supplier's product. 
C) Net book value of the production equipment used to make the item in question. 
D) Contribution margin generated by an alternative use of the production equipment. 
E) Financial stability of the supplier.

Question 16

A special sales order is:

Accepted Answer

A) Typically expected. 
B) A profitable opportunity to sell a specified quantity of a firm's product or service. 
C) A one-time opportunity to sell a specified quantity of a product or service. 
D) A particularly large customer order. 
E) In most cases, a rush order. 
A) Typically expected. 
B) A profitable opportunity to sell a specified quantity of a firm's product or service. 
C) A one-time opportunity to sell a specified quantity of a product or service. 
D) A particularly large customer order. 
E) In most cases, a rush order.

Question 17

If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in net savings annually. To achieve this goal, the minimum annual rent on the facility must be:

Accepted Answer

A) $10,000. 
B) $40,000. 
C) $70,000. 
D) $190,000. 
E) $280,000. 
A) $10,000. 
B) $40,000. 
C) $70,000. 
D) $190,000. 
E) $280,000.

Question 18

The costs described in situations 2, 3, and 5 above are:

Accepted Answer

A) Prime costs. 
B) Sunk costs. 
C) Discretionary costs. 
D) Relevant costs. 
E) Differential costs. 
A) Prime costs. 
B) Sunk costs. 
C) Discretionary costs. 
D) Relevant costs. 
E) Differential costs.

Question 19

The costs described in situations I and IV above are:

Accepted Answer

A) Prime costs. 
B) Sunk costs. 
C) Discretionary costs. 
D) Relevant costs. 
E) Opportunity costs. 
A) Prime costs. 
B) Sunk costs. 
C) Discretionary costs. 
D) Relevant costs. 
E) Opportunity costs.

Question 20

Feel the Difference, Inc. manufactures bath and beauty products such as soaps, skin creams, lotions, and other products primarily for people with dry and sensitive skin. It has just introduced a new line of product that removes the spotting and wrinkling in skin associated with aging. It sells these products in pharmacies and department stores at prices slightly higher than those of other brands because of Feel the Difference's excellent reputation for quality and effectiveness.
Feel the Difference currently has very low utilization of plant capacity. Two years ago, in anticipation of rapid growth, the company opened a new large manufacturing plant, which has yet to be utilized more than 50 percent. Partly for this reason, Feel the Difference has sought new partners and was able, with the help of financial analysts, to locate suitable business partners. The first potential partner identified in this search was a large supermarket chain, All-Mart, which is interested in the partnership because it wants Feel the Difference to manufacture an age cream to sell in its stores. The product would be essentially the same as the Feel the Difference product but would be packaged in the All-Mart brand name. The agreement would pay Feel the Difference $2.00 per unit and would allow All-Mart a limited right to advertise the product as manufactured for All-Mart by Feel the Difference. Feel the Difference's CFO has made some calculations and has determined that the direct materials, direct labor and other variable costs needed for the All-Mart order would be about $1.00 per unit as compared to the full cost of $2.50 (materials, labor, and overhead) for the equivalent Feel the Difference product.
Required:
Should Feel the Difference accept the proposal from All-Mart? Why or why not? (Include strategic considerations)

Accepted Answer

Answer may vary
Feedback: To begin the a

The two inequality functions above are:

The contribution margin per machine hour is calculated as:

The make-or-buy decision can apply to decisions about all of the following except:

Relevant costs in a make-vs.-buy decision of a part include:

Sensitivity analysis in linear programming is used to:

In a sell-or-process-further decision, joint production costs:

Opportunity costs:

A company's approach to a make-or-buy decision:

The shadow price in a linear programming model is:

Which of the following items does NOT have to be considered when evaluating a make-or-buy decision?

A special sales order is:

If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in net savings annually. To achieve this goal, the minimum annual rent on the facility must be:

The costs described in situations 2, 3, and 5 above are:

The costs described in situations I and IV above are:

Cost Management and Strategy

Implementing Strategy: the Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

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Exam 11: Decision Making With a Strategic Emphasis

The two inequality functions above are:

The contribution margin per machine hour is calculated as:

The make-or-buy decision can apply to decisions about all of the following except:

Relevant costs in a make-vs.-buy decision of a part include:

Sensitivity analysis in linear programming is used to:

In a sell-or-process-further decision, joint production costs:

Opportunity costs:

A company's approach to a make-or-buy decision:

The shadow price in a linear programming model is:

Which of the following items does NOT have to be considered when evaluating a make-or-buy decision?

A special sales order is:

If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in net savings annually. To achieve this goal, the minimum annual rent on the facility must be:

The costs described in situations 2, 3, and 5 above are:

The costs described in situations I and IV above are:

Cost Management and Strategy

Implementing Strategy: the Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

Filters