Question 1

Opportunity costs are:

Accepted Answer

A)  If significant in amount, deductible for U.S. federal income tax purposes. 
B)  Usually variable costs. 
C)  Equal to historical costs. 
D)  Recorded in accounting records at estimated fair value. 
E)  Relevant for decision making. 
A)  If significant in amount, deductible for U.S. federal income tax purposes. 
B)  Usually variable costs. 
C)  Equal to historical costs. 
D)  Recorded in accounting records at estimated fair value. 
E)  Relevant for decision making.

Question 2

The Crown Company must decide whether to make or buy part 128PC.Although Crown's idle equipment could be used to produce up to 10,000 units of the part, the company presently needs only 7,000 units.The following shows the estimated cost of making part 128PC.   Reuten Company will sell part 128PC to the Crown Company for $20 per unit.
Required: Determine whether Crown should make or buy the part, and explain why.

Accepted Answer

Relevant Costs: @#IMG-DLM& Cro

Question 3

Determination of the optimum short-term product mix should focus on:

Accepted Answer

A)  Fully absorbed costs. 
B)  Production (that is, resource) and demand constraints. 
C)  Sales-mix costs. 
D)  Revenue forecasts for each of the firm's products or services. 
E)  The relative sales values of the firm's outputs (goods or services). 
A)  Fully absorbed costs. 
B)  Production (that is, resource) and demand constraints. 
C)  Sales-mix costs. 
D)  Revenue forecasts for each of the firm's products or services. 
E)  The relative sales values of the firm's outputs (goods or services).

Question 4

The following cost information pertained to the Violin Division of Stringing Music Co. and was based on monthly demand and sales of 100 units: Given a normal selling price per unit of $750, what is the contribution margin per unit sold for recurring (i.e., normal) sales?

Accepted Answer

A)  $336. 
B)  $316. 
C)  $276. 
D)  $396. 
E)  $630. 
A)  $336. 
B)  $316. 
C)  $276. 
D)  $396. 
E)  $630.

Question 5

Which of the following items should not 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 (NBV) of the production equipment currently 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 (NBV) of the production equipment currently 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 6

Manders Manufacturing Corporation uses the following model to determine an optimal short-term product mix for its two products, metal (M) and scrap metal (S):
Max Z = $30M + $70S
Where: 3M + 2S ≤ 15
2M + 4S ≤ 18
The above mathematical functions together constitute a(n):

Accepted Answer

A)  Simulation model. 
B)  Linear programming model. 
C)  Economic order quantity model. 
D)  Multivariate regression model. 
E)  Nonlinear optimization model. 
A)  Simulation model. 
B)  Linear programming model. 
C)  Economic order quantity model. 
D)  Multivariate regression model. 
E)  Nonlinear optimization model.

Question 7

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: $\begin{array}{lr}
\text { Direct materials } & \$ 6 \
\text { Direct labor } & 24 \
\text { Variable overhead } & 12 \
\text { Fixed overhead applied } & \underline{15} \
& \$ 57\\text { Cost to buy the part from }\\text { Utica Company }&\$53
\end{array}$ 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 8

A truck, costing $25,000 and uninsured, was wrecked the very first day it was used. It can either be disposed for $5,000 cash and replaced with a similar truck costing $27,000, or it can be rebuilt for $20,000 and be brand new as far as operating characteristics and looks are concerned. The preferred decision alternative provides a net cost savings of:

Accepted Answer

A)  $2,000. 
B)  $5,000. 
C)  $7,000. 
D)  $12,000. 
E)  Some amount other than these choices. 
A)  $2,000. 
B)  $5,000. 
C)  $7,000. 
D)  $12,000. 
E)  Some amount other than these choices.

Question 9

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 10

Smith Co., maker of high-quality eyewear, incurs fixed costs of $18 and variable costs of $36 in making one unit of its matrix line of sunglasses, based on current demand of 100,000 units per year. Smith Co.'s major supplier has offered to make all 100,000 matrix sunglasses for $44 each. If Smith accepts the offer of the supplier, it will save $4 per unit in fixed costs. Based solely on this information, what is the recommended decision and how much will be saved based on this decision?

Accepted Answer

A)  Smith Co. should buy the sunglasses in order to save $200,000. 
B)  Smith Co. should buy the sunglasses in order to save $500,000. 
C)  Smith Co. should make the sunglasses in order to save $400,000. 
D)  Smith Co. should make the sunglasses in order to save $300,000. 
A)  Smith Co. should buy the sunglasses in order to save $200,000. 
B)  Smith Co. should buy the sunglasses in order to save $500,000. 
C)  Smith Co. should make the sunglasses in order to save $400,000. 
D)  Smith Co. should make the sunglasses in order to save $300,000.

Question 11

Relevant costs for a make-or-buy decision for a component part include all the following except:

Accepted Answer

A)  Fixed salaries that will not be incurred if the part is outsourced. 
B)  Payroll tax (unemployment insurance cost), because of outsourcing. 
C)  Material-handling costs that can be eliminated if the part is outsourced. 
D)  Fixed overhead currently being allocated to the part. 
E)  Current direct material costs for the part. 
A)  Fixed salaries that will not be incurred if the part is outsourced. 
B)  Payroll tax (unemployment insurance cost), because of outsourcing. 
C)  Material-handling costs that can be eliminated if the part is outsourced. 
D)  Fixed overhead currently being allocated to the part. 
E)  Current direct material costs for the part.

Question 12

A truck, costing $25,000 and uninsured, was wrecked the very first day it was used. The truck can either be disposed for $5,000 cash and replaced with a similar truck costing $27,000, or rebuilt for $20,000 and be "new" as far as operating characteristics and looks are concerned. The net relevant cost of the replacing option is:

Accepted Answer

A)  $5,000. 
B)  $20,000. 
C)  $22,000. 
D)  $25,000. 
E)  $27,000. 
A)  $5,000. 
B)  $20,000. 
C)  $22,000. 
D)  $25,000. 
E)  $27,000.

Question 13

Opportunity costs:

Accepted Answer

A)  Result in a cash outlay. 
B)  Unless they are zero are always relevant for decision making. 
C)  Can sometimes be deductible for U.S. federal income tax purposes. 
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 they are zero are always relevant for decision making. 
C)  Can sometimes be deductible for U.S. federal income tax purposes. 
D)  Are recorded in the accounting records. 
E)  Are the result of a completed event or transaction.

Question 14

Three Stars Inc.manufactures prefabricated houses.The firm's president, Michelle Brown, is interested in determining whether it would be better to manufacture the doors used in the houses or to buy them from a supplier.The following information, based on production of 500 doors, has been gathered to help determine the best option:   Of the fixed overhead costs, Three Stars estimates that it could save $5 per unit of miscellaneous fixed overhead if it purchases the doors from a supplier and allocates all other fixed costs elsewhere.The cost to purchase 500 doors would be $55,000.
Required: Should Three Stars make or purchase the doors? What is the savings per unit?

Accepted Answer

@#IMG-DLM& Outside Purchase Cost = ($55,

Question 15

The Multi Resource Company manufactures two lines of washing machines, Regular and Deluxe. The contribution margin per unit of a Regular model is $110 and for Deluxe Model is $175. The company has two departments, Assembly and Testing. The Regular Model requires 3 hours to assemble, while a Deluxe Model requires 4 hours. The total time available in Assembly is 12,000 hours. In the Testing Department, it requires 2.5 hours to test a Regular Model and 1.5 hours to test a Deluxe Model. A total of 6,000 hours of testing time is available. Based on this information, the optimum production plan for Multi Resource is:

Accepted Answer

A)  2,400 Regular Models 
B)  3,000 Deluxe Models 
C)  1,091 Regular Models and 2,182 Deluxe Models 
D)  4,000 Deluxe Models 
E)  4,000 Regular Models 
A)  2,400 Regular Models 
B)  3,000 Deluxe Models 
C)  1,091 Regular Models and 2,182 Deluxe Models 
D)  4,000 Deluxe Models 
E)  4,000 Regular Models

Question 16

Which of the following statements regarding "opportunity costs" is true?

Accepted Answer

A)  These costs are recorded routinely by most modern cost accounting systems. 
B)  These costs relate to the benefit lost or foregone when a chosen option (course of action) precludes the benefits of an alternative option from being realized. 
C)  These costs are generally deductible for federal income tax purposes in the U.S. 
D)  In terms of most short-run decisions, they are irrelevant. 
E)  They are usually considered a sunk cost associated with one or more decision alternatives. 
A)  These costs are recorded routinely by most modern cost accounting systems. 
B)  These costs relate to the benefit lost or foregone when a chosen option (course of action) precludes the benefits of an alternative option from being realized. 
C)  These costs are generally deductible for federal income tax purposes in the U.S. 
D)  In terms of most short-run decisions, they are irrelevant. 
E)  They are usually considered a sunk cost associated with one or more decision alternatives.

Question 17

Joint (common) costs in a joint production process are relevant for determining:

Accepted Answer

A)  Whether to produce at all. 
B)  Which products should be produced up to the split-off point in the production process. 
C)  Which products should be produced internally and which products should be outsourced. 
D)  The set of products that should be subjected to additional processing. 
E)  The selling price of individual products produced as part of the joint production process. 
A)  Whether to produce at all. 
B)  Which products should be produced up to the split-off point in the production process. 
C)  Which products should be produced internally and which products should be outsourced. 
D)  The set of products that should be subjected to additional processing. 
E)  The selling price of individual products produced as part of the joint production process.

Question 18

Management accountants are frequently asked to analyze various decision situations including the following:

●	The cost of a special device that is necessary if a special order is accepted. 
●	The cost proposed annually for the plant service for the grounds at corporate headquarters. 
●	Joint production costs incurred, to be considered in a sell-or-process-further decision. 
●	The costs associated with alternative uses of plant space, to be considered in a make/buy decision. 
●	The cost of obsolete inventory acquired several years ago, to be considered in a keep-versus-disposal decision.

The costs described in situations I and IV above are examples of:

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 19

The following unit cost information pertains to the trumpet division of WGN Music Co. and is based on monthly demand and sales of 100 units: Required:
1. Calculate total relevant cost per unit for each unit in the special-sales order.
2. Should WGN accept the special order? Why or why not? (Show details.)

Accepted Answer

1. Relevan

Question 20

In a joint production process, the allocation of joint (common) costs to each of the joint products being produced is needed principally:

Accepted Answer

A)  To meet external reporting requirements (i.e., for financial statement preparation purposes). 
B)  To determine whether the firm in question should produce at all. 
C)  To assess supplier performance. 
D)  To determine which products, if any, should be processed beyond the split-off point. 
E)  For determining the incremental revenues associated with additional processing of each product. 
A)  To meet external reporting requirements (i.e., for financial statement preparation purposes). 
B)  To determine whether the firm in question should produce at all. 
C)  To assess supplier performance. 
D)  To determine which products, if any, should be processed beyond the split-off point. 
E)  For determining the incremental revenues associated with additional processing of each product.

Opportunity costs are:

Determination of the optimum short-term product mix should focus on:

The following cost information pertained to the Violin Division of Stringing Music Co. and was based on monthly demand and sales of 100 units:Given a normal selling price per unit of $750, what is the contribution margin per unit sold for recurring (i.e., normal) sales?

Which of the following items should not be considered when evaluating a make-or-buy decision?

Manders Manufacturing Corporation uses the following model to determine an optimal short-term product mix for its two products, metal (M) and scrap metal (S): Max Z = $30M + $70S Where: 3M + 2S ≤ 15 2M + 4S ≤ 18 The above mathematical functions together constitute a(n):

Relevant costs for a make-or-buy decision for a component part include all the following except:

Opportunity costs:

Which of the following statements regarding "opportunity costs" is true?

Joint (common) costs in a joint production process are relevant for determining:

In a joint production process, the allocation of joint (common) costs to each of the joint products being produced is needed principally:

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

Exam 11: Decision Making With a Strategic Emphasis

Opportunity costs are:

Determination of the optimum short-term product mix should focus on:

The following cost information pertained to the Violin Division of Stringing Music Co. and was based on monthly demand and sales of 100 units:Given a normal selling price per unit of $750, what is the contribution margin per unit sold for recurring (i.e., normal) sales?

Which of the following items should not be considered when evaluating a make-or-buy decision?

Manders Manufacturing Corporation uses the following model to determine an optimal short-term product mix for its two products, metal (M) and scrap metal (S): Max Z = $30M + $70S Where: 3M + 2S ≤ 15 2M + 4S ≤ 18 The above mathematical functions together constitute a(n):

Relevant costs for a make-or-buy decision for a component part include all the following except:

Opportunity costs:

Which of the following statements regarding "opportunity costs" is true?

Joint (common) costs in a joint production process are relevant for determining:

In a joint production process, the allocation of joint (common) costs to each of the joint products being produced is needed principally:

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