Question 1

The value-chain analysis used regarding the "make-or-buy decision" often leads a firm to make use of:

Accepted Answer

A)  Activity-based costing (AB
C) . 
B)  Cost-volume profit (CVP) analysis. 
C)  Outsourcing options. 
D)  Relevant cost-based pricing. 
E)  Value stream accounting. 
A)  Activity-based costing (AB
C) . 
B)  Cost-volume profit (CVP) analysis. 
C)  Outsourcing options. 
D)  Relevant cost-based pricing. 
E)  Value stream accounting.

Question 2

Preston Industries, Inc. currently manufactures part QX100, which is used in several products produced by the company. Monthly production costs for 10,000 units of QX100 are as follows: Accounting has estimated that 20% of the fixed overhead costs currently assigned to QX100 would not be needed if the company chose to purchase the part from an outside supplier. Preston currently has the option of purchasing the part from an outside supplier at $16.00 per unit.
Based solely on a short-run financial analysis, the maximum price that Preston should be willing to pay the outside vendor for each unit of QX100 is:

Accepted Answer

A)  $10.00 
B)  $11.00 
C)  $15.00 
D)  $15.80 
E)  $16.00 
A)  $10.00 
B)  $11.00 
C)  $15.00 
D)  $15.80 
E)  $16.00

Question 3

Apex Manufacturing Corporation is considering a significant shift in the mix of products it manufactures. The costs associated with current and proposed production schedules are shown below by category:  TThe proposed production schedule will require a one-time purchase of equipment costing $180,000. No change in selling or administrative cost from their present levels is expected. 
Required:
1. What type of relevant cost analysis would be appropriate in this situation (special order, make-lease-buy, etc.)? Why?
2. What role does depreciation and equipment purchase cost play in this decision?
3. What is the minimum amount that revenue would have to increase per month to justify the proposed production schedule? Ignore taxes and the time value of money.

Accepted Answer

1. Either a profitability analysis to ev

Question 4

When a firm has surplus capacity (that is, no resource constraints), relevant costs for decision-making (for example, determining short-term product mix) will, relative to the situation where the firm faces one or more resource constraints, be:

Accepted Answer

A)  Lower. 
B)  The same. 
C)  Greater. 
D)  It varies—that is, it is impossible to tell without further information. 
A)  Lower. 
B)  The same. 
C)  Greater. 
D)  It varies—that is, it is impossible to tell without further information.

Question 5

The shadow price in a linear programming model is:

Accepted Answer

A)  Interesting from a mathematical or economic theory standpoint, but not generally useful from an accounting standpoint. 
B)  Equal to the current market price for an additional unit of the related resource. 
C)  The maximum price a rational decision-maker 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 or economic theory standpoint, but not generally useful from an accounting standpoint. 
B)  Equal to the current market price for an additional unit of the related resource. 
C)  The maximum price a rational decision-maker 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 6

Triad Children's Center (TCC), a non-profit organization, uses relevant cost analysis to determine whether new services are desirable. TCC is looking at adding a new educational program for grade school children who are having difficulty with their reading and math skills. The following relevant costs are expected if the program is accepted: TCC estimates that a maximum of 40 children will participate in this program in the first year. If TCC decides to implement this program, funding will be received from the City Chamber of Commerce ($50,000) and a local Private University Endowment Fund ($35,000).
In deciding between alternative choices for a given situation (such as the above new-program evaluation), TCC may employ a five-step decision process. Which of the following is not a recommended step in this decision-making process?

Accepted Answer

A)  Evaluate performance. 
B)  Specify the criteria and identify the alternative actions. 
C)  Select and implement the best course of action. 
D)  Perform relevant and strategic cost analysis. 
E)  Review the completed financial audit report. 
A)  Evaluate performance. 
B)  Specify the criteria and identify the alternative actions. 
C)  Select and implement the best course of action. 
D)  Perform relevant and strategic cost analysis. 
E)  Review the completed financial audit report.

Question 7

A useful concept for solving production-planning problems involving multiple products and limited resources is:

Accepted Answer

A)  Gross profit per unit of product. 
B)  Contribution per unit of scarce resource. 
C)  Value-stream costing. 
D)  Relevant cost pricing. 
E)  The contribution income statement. 
A)  Gross profit per unit of product. 
B)  Contribution per unit of scarce resource. 
C)  Value-stream costing. 
D)  Relevant cost pricing. 
E)  The contribution income statement.

Question 8

In deciding whether to accept or reject a "special sales order," managers need critical information about all the following except:

Accepted Answer

A)  Relevant costs. 
B)  Prior period operating costs. 
C)  Any opportunity costs associated with accepting the order. 
D)  The strategic, competitive environment of the firm. 
E)  Alternative uses of existing capacity. 
A)  Relevant costs. 
B)  Prior period operating costs. 
C)  Any opportunity costs associated with accepting the order. 
D)  The strategic, competitive environment of the firm. 
E)  Alternative uses of existing capacity.

Question 9

A recent article in The McKinsey Quarterly, present a useful list of some of the ways that strategic decisions can go wrong because of human shortcomings: 1.Overconfidence; 2.Loss aversion; 3.Champion Bias; 4.Misaligned risk aversion; and 5.Misaligned time horizon
Required: Provide a one sentence explanation for each of the five human shortcomings in decision making.

Accepted Answer

1.Overconfidence; the result is to under

Question 10

Zap Video Inc. produces two basic types of video games, Clash and Slash. Pertinent data follow (DLH = direct labor hour): There is insufficient labor capacity (i.e., DLHs) in the plant to meet the combined demand for both Clash and Slash.
Both products are produced through the same production departments.
In view of the labor shortage, which of the two products is most profitable, and how much is the contribution margin, per DLH?

Accepted Answer

A)  Slash, $23.00. 
B)  Clash, $18.00. 
C)  Slash, $11.50. 
D)  Slash, $11.00. 
E)  Clash, $10.50. 
A)  Slash, $23.00. 
B)  Clash, $18.00. 
C)  Slash, $11.50. 
D)  Slash, $11.00. 
E)  Clash, $10.50.

Question 11

Value streams are useful in decision-making because:

Accepted Answer

A)  They identify all value-added products and services. 
B)  They help to highlight improved efficiency in the plant. 
C)  Special orders can be evaluated within the context of the value stream. 
D)  Irrelevant costs are identified. 
E)  Lean thinking produces costlier products. 
A)  They identify all value-added products and services. 
B)  They help to highlight improved efficiency in the plant. 
C)  Special orders can be evaluated within the context of the value stream. 
D)  Irrelevant costs are identified. 
E)  Lean thinking produces costlier products.

Question 12

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 III and V 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 13

For short-run product-mix decisions, relevant costs (for the seller) include short-run ________ costs plus any ________ costs.

Accepted Answer

A)  direct material; unavoidable fixed 
B)  out-of-pocket; opportunity 
C)  fixed; differential 
D)  support; distribution 
E)  capital; opportunity 
A)  direct material; unavoidable fixed 
B)  out-of-pocket; opportunity 
C)  fixed; differential 
D)  support; distribution 
E)  capital; opportunity

Question 14

The contribution margin per machine hour for a given product is calculated as:

Accepted Answer

A)  Full cost per unit/number of machine-hours per unit for the product in question. 
B)  Number of machine-hours per unit for the product in question/full-cost per unit of the product. 
C)  Selling price per unit less variable manufacturing cost per unit for the product in question. 
D)  Selling price per unit for the product less the product's variable manufacturing cost per unit less the variable selling cost per unit for the product. 
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 for the product in question. 
B)  Number of machine-hours per unit for the product in question/full-cost per unit of the product. 
C)  Selling price per unit less variable manufacturing cost per unit for the product in question. 
D)  Selling price per unit for the product less the product's variable manufacturing cost per unit less the variable selling cost per unit for the product. 
E)  Selling price per unit less total variable cost per unit, divided by number of machine-hours per unit.

Question 15

The Sand Cruiser is a takeout food store at a popular beachside resort. Teresa Texton, owner of the Sand Cruiser, was deciding how much refrigerator space to devote to four different beverages. Appropriate data on the four beverages follow: The contribution margin per case for Lemonade is:

Accepted Answer

A)  $5.50. 
B)  $6.40. 
C)  $5.40. 
D)  $4.80. 
E)  $9.90. 
A)  $5.50. 
B)  $6.40. 
C)  $5.40. 
D)  $4.80. 
E)  $9.90.

Question 16

"Committed" and "Sunk" costs are:

Accepted Answer

A)  Generally not fixed. 
B)  Generally small in amount. 
C)  The result of prior bad decisions. 
D)  Not relevant for decision-making. 
E)  Recoverable in trade. 
A)  Generally not fixed. 
B)  Generally small in amount. 
C)  The result of prior bad decisions. 
D)  Not relevant for decision-making. 
E)  Recoverable in trade.

Question 17

Harrington Corporation produces three products, A, B, and C. Pertinent information on these products is as follows: There are 150 direct labor hours available. Machine-hour capacity allows 100 anchor bolts, only; 50 bearings, only; 40 casters, only; or any combination of the three that does not exceed the capacity.
The direct labor hour constraint for Harrington's linear programming model is:

Accepted Answer

A)  A + B + C ≤ 150. 
B)  Min Z = 2A + 2B + 3C. 
C)  Max Z = 2A + 2B + 3C − 150. 
D)  100A + 50B + 40C ≤ 1,050. 
E)  2A + 2B + 3C ≤ 150. 
A)  A + B + C ≤ 150. 
B)  Min Z = 2A + 2B + 3C. 
C)  Max Z = 2A + 2B + 3C − 150. 
D)  100A + 50B + 40C ≤ 1,050. 
E)  2A + 2B + 3C ≤ 150.

Question 18

Marchant Industries, which produces heating blankets, has been trying to get a customer, Home Select, Inc., to purchase a special order of heating blankets in order to keep the plant busy at a time when production is expected to be slower than normal.Home Select has agreed, but only if the price is reduced to $42.Listed below are some data prepared by Marchant.The special order can be produced within available capacity, and will be made in a single batch.   There are no variable marketing costs associated with the special order, but Ruby Marchant, the president of the firm, has spent $1,500 during the past month trying to get Home Select to purchase this special order.
Required: Determine the effect of the special order, if taken, on Marchant's total profit.

Accepted Answer

@#IMG-DLM& Total relevant manufacturing costs (var

Question 19

In a joint production process, joint product costs are:

Accepted Answer

A)  Those costs incurred after the split-off point. 
B)  Allocated to outputs (products) to facilitate short-term decision making. 
C)  Not relevant to the decision whether to produce at all. 
D)  Those that are incurred before the split-off point. 
E)  Relatively small compared to costs incurred after the split-off point. 
A)  Those costs incurred after the split-off point. 
B)  Allocated to outputs (products) to facilitate short-term decision making. 
C)  Not relevant to the decision whether to produce at all. 
D)  Those that are incurred before the split-off point. 
E)  Relatively small compared to costs incurred after the split-off point.

Question 20

You just bought a new luxury sports car for $125,000. Before you had time to get insurance, the car was wrecked. Weird Wally offers to take it off your hands for $10,000. You can then purchase a similar model for $128,000. A body-shop (with an excellent reputation) offers to rebuild the wrecked car for $90,000 and loan you a similar model while the vehicle is being rebuilt. Once rebuilt, the body-shop claims, it will "run like a new car and nobody will be able to tell the difference." What is the preferred course of action, from a financial point of view?

Accepted Answer

A)  Rebuild to save $13,000. 
B)  Rebuild to save $28,000. 
C)  Rebuild to save $38,000. 
D)  Sell to Weird Wally and save $7,000. 
A)  Rebuild to save $13,000. 
B)  Rebuild to save $28,000. 
C)  Rebuild to save $38,000. 
D)  Sell to Weird Wally and save $7,000.

The value-chain analysis used regarding the "make-or-buy decision" often leads a firm to make use of:

When a firm has surplus capacity (that is, no resource constraints), relevant costs for decision-making (for example, determining short-term product mix) will, relative to the situation where the firm faces one or more resource constraints, be:

The shadow price in a linear programming model is:

A useful concept for solving production-planning problems involving multiple products and limited resources is:

In deciding whether to accept or reject a "special sales order," managers need critical information about all the following except:

Value streams are useful in decision-making because:

For short-run product-mix decisions, relevant costs (for the seller) include short-run costs plus any costs.

The contribution margin per machine hour for a given product is calculated as:

The Sand Cruiser is a takeout food store at a popular beachside resort. Teresa Texton, owner of the Sand Cruiser, was deciding how much refrigerator space to devote to four different beverages. Appropriate data on the four beverages follow:The contribution margin per case for Lemonade is:

"Committed" and "Sunk" costs are:

In a joint production process, joint product costs 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

Exam 11: Decision Making With a Strategic Emphasis

The value-chain analysis used regarding the "make-or-buy decision" often leads a firm to make use of:

When a firm has surplus capacity (that is, no resource constraints), relevant costs for decision-making (for example, determining short-term product mix) will, relative to the situation where the firm faces one or more resource constraints, be:

The shadow price in a linear programming model is:

A useful concept for solving production-planning problems involving multiple products and limited resources is:

In deciding whether to accept or reject a "special sales order," managers need critical information about all the following except:

Value streams are useful in decision-making because:

For short-run product-mix decisions, relevant costs (for the seller) include short-run ________ costs plus any ________ costs.

The contribution margin per machine hour for a given product is calculated as:

The Sand Cruiser is a takeout food store at a popular beachside resort. Teresa Texton, owner of the Sand Cruiser, was deciding how much refrigerator space to devote to four different beverages. Appropriate data on the four beverages follow:The contribution margin per case for Lemonade is:

"Committed" and "Sunk" costs are:

In a joint production process, joint product costs 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

For short-run product-mix decisions, relevant costs (for the seller) include short-run costs plus any costs.