Question 1

Done on a regular basis, relevant cost pricing in special order decisions can erode normal pricing policies and lead to:

Accepted Answer

A) Overconfidence in decision-making. 
B) A decrease in the firm's long-term profitability. 
C) Goal congruence between management and sales personnel. 
D) A cost leadership strategy. 
E) Maximization of the value stream. 
A) Overconfidence in decision-making. 
B) A decrease in the firm's long-term profitability. 
C) Goal congruence between management and sales personnel. 
D) A cost leadership strategy. 
E) Maximization of the value stream.

Question 2

The controller for Warner Mfg. is trying to implement some of the characteristics of a just-in-time (JIT) inventory system. She has accumulated data on Warner's present inventory system and obtained some projections and estimates of what the results of a JIT system would be.   The inventory holding cost is $0.75 per unit, per month. Warner currently purchases 120,000 units every four months. Under a JIT system Warner would purchase 30,000 units every month. The monthly inventory schedule and the controller's estimate for a JIT system are provided below:   (Assume the above trend continues throughout the year.)
Required: Which system should Warner use, and why?

Accepted Answer

Answer may vary
Feedback:
1. Inventory p

Question 3

What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?

Accepted Answer

Answer may vary
Feedback: First, the com

Question 4

Assume that the Violin Division was evaluating whether or not it would accept a special sales order for ten violins at $390 per unit. For this purpose, total relevant cost per unit (given the costs stated above) is:

Accepted Answer

A) $330. 
B) $342. 
C) $390. 
D) $366. 
E) $354. 
A) $330. 
B) $342. 
C) $390. 
D) $366. 
E) $354.

Question 5

Orange Computer Co. is quickly becoming a major player in the personal computer market. The company currently has multiple companies producing products that go into an Orange computer. This practice of having an outside firm provide a function for Orange Computer Co. is called:

Accepted Answer

A) Outsourcing. 
B) Opportunity costing. 
C) Profitability maximization. 
D) Strategic positioning. 
E) Multivariate sourcing. 
A) Outsourcing. 
B) Opportunity costing. 
C) Profitability maximization. 
D) Strategic positioning. 
E) Multivariate sourcing.

Question 6

In deciding between alternative choices for a given situation, managers usually employ a five-step process. Which of the following is not a step in the 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 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 audit report.

Question 7

Diamond is thinking of dropping Product Line C because it is reporting an operating loss. Assuming the company drops Product Line C and does not replace it, operating income for the firm will:

Accepted Answer

A) Be unchanged 
B) Increase by $1,200 
C) Increase by $1,500 
D) Decrease by $1,500 
E) Decrease by $2,700 
A) Be unchanged 
B) Increase by $1,200 
C) Increase by $1,500 
D) Decrease by $1,500 
E) Decrease by $2,700

Question 8

Which of the following statements regarding a joint production process is NOT true?

Accepted Answer

A) The essential decision facing management is whether to sell products at the split-off point or to sell these products after further processing. 
B) The allocation of joint (common) production costs to individual products helps management determine which products should be processed beyond the split-off point. 
C) Costs incurred up to the split-off point are referred to as joint production costs. 
D) The decision as to whether individual products should be sold "as is" or processed further is made on the basis of comparing incremental revenues and incremental costs. 
E) For financial reporting purposes output (inventory) is valued at the sum of separable processing cost plus an allocated share of joint production costs. 
A) The essential decision facing management is whether to sell products at the split-off point or to sell these products after further processing. 
B) The allocation of joint (common) production costs to individual products helps management determine which products should be processed beyond the split-off point. 
C) Costs incurred up to the split-off point are referred to as joint production costs. 
D) The decision as to whether individual products should be sold "as is" or processed further is made on the basis of comparing incremental revenues and incremental costs. 
E) For financial reporting purposes output (inventory) is valued at the sum of separable processing cost plus an allocated share of joint production costs.

Question 9

All the following are characteristic of relevant costs except:

Accepted Answer

A) They are generally variable. 
B) They are not committed. 
C) They are different in amount for different options. 
D) They are costs that will be incurred in the future. 
E) They are inventory-related costs. 
A) They are generally variable. 
B) They are not committed. 
C) They are different in amount for different options. 
D) They are costs that will be incurred in the future. 
E) They are inventory-related costs.

Question 10

A small company makes only two products with the following production constraints representing two machines and their maximum availability:   If the profit equation is Z = $4X + $2Y, the maximum possible profit is:

Accepted Answer

A) $20 
B) $21 
C) $18 
D) $24 
E) $14 
A) $20 
B) $21 
C) $18 
D) $24 
E) $14

Question 11

Variable costs will generally be relevant for decision making because they:

Accepted Answer

A) Differ between options. 
B) Are volume-based. 
C) Have not been committed and differ between options. 
D) Differ between options and have been committed. 
E) Measure opportunity cost. 
A) Differ between options. 
B) Are volume-based. 
C) Have not been committed and differ between options. 
D) Differ between options and have been committed. 
E) Measure opportunity cost.

Question 12

The machine-hour constraint for Harrington's linear program is:

Accepted Answer

A) The same as the labor-hour constraint. 
B) A + 2B + 2.5C ≤ 100. 
C) Indeterminable from the data given. 
D) A + B + C ≤ 190. 
E) 100A + 50B + 40C ≤ 19,000. 
A) The same as the labor-hour constraint. 
B) A + 2B + 2.5C ≤ 100. 
C) Indeterminable from the data given. 
D) A + B + C ≤ 190. 
E) 100A + 50B + 40C ≤ 19,000.

Question 13

The following unit cost information pertained to the trumpet division of WGN Music Co. and was based on monthly demand and sales of 100 units:   Assume that the Trumpet Division was evaluating whether or not it would accept a special order for ten trumpets at $500 per unit.
Required:
1. Calculate total relevant cost per unit.
2. Should WGN accept the special order; why or why not?

Accepted Answer

Answer may vary
Feedback: 1. @#IMG-DLM&

Question 14

Relevant or differential cost analysis:

Accepted Answer

A) Takes all variable and fixed costs into account to analyze decision alternatives. 
B) Considers only variable costs as they change with each decision alternative. 
C) Considers only nonfinancial and strategic factors associated with each decision alternative. 
D) Considers all variable and fixed costs as they change with each decision alternative. 
E) Allows the decision maker to group all types of costs together to facility decision making. 
A) Takes all variable and fixed costs into account to analyze decision alternatives. 
B) Considers only variable costs as they change with each decision alternative. 
C) Considers only nonfinancial and strategic factors associated with each decision alternative. 
D) Considers all variable and fixed costs as they change with each decision alternative. 
E) Allows the decision maker to group all types of costs together to facility decision making.

Question 15

A decision bias is an inherent tendency of most decision makers that leads to incorrect decisions. An example of decision bias is:

Accepted Answer

A) Failure to consider all relevant costs. 
B) Failure to properly identify sunk costs as irrelevant. 
C) Failure to consider opportunity cost. 
D) Failure to adjust for the time value of money. 
E) Failure to consider legal constraints associated with the pricing decision. 
A) Failure to consider all relevant costs. 
B) Failure to properly identify sunk costs as irrelevant. 
C) Failure to consider opportunity cost. 
D) Failure to adjust for the time value of money. 
E) Failure to consider legal constraints associated with the pricing decision.

Question 16

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. 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, Smith will save $4 per unit in fixed costs. Based on this information, should Smith Co. make or buy the sunglasses and how much will be saved?

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 17

The cost(s) NOT relevant for this asset-replacement decision is/are:

Accepted Answer

A) The acquisition cost of the used fork lift. 
B) The acquisition cost of the existing fork lift. 
C) The repairs cost for the existing fork lift. 
D) The annual operating costs for the existing fork lift. 
E) The annual operating costs for the used fork lift. 
A) The acquisition cost of the used fork lift. 
B) The acquisition cost of the existing fork lift. 
C) The repairs cost for the existing fork lift. 
D) The annual operating costs for the existing fork lift. 
E) The annual operating costs for the used fork lift.

Question 18

The mixing constraint for the Keego linear program would be:

Accepted Answer

A) 2.4M + 6P ≤ 36,000. 
B) 5B + 2.4C ≥ 800. 
C) 5B + 2.4C ≤ 800. 
D) 5B + 2.4C = 800. 
E) 7.4M + 9.6P ≤ 36,000. 
A) 2.4M + 6P ≤ 36,000. 
B) 5B + 2.4C ≥ 800. 
C) 5B + 2.4C ≤ 800. 
D) 5B + 2.4C = 800. 
E) 7.4M + 9.6P ≤ 36,000.

Question 19

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

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 managerial performance. 
D) To determine which products, if any, should be produced beyond the split-off point. 
E) For short-term decision-making purposes. 
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 managerial performance. 
D) To determine which products, if any, should be produced beyond the split-off point. 
E) For short-term decision-making purposes.

Question 20

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.

Done on a regular basis, relevant cost pricing in special order decisions can erode normal pricing policies and lead to:

What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?

Assume that the Violin Division was evaluating whether or not it would accept a special sales order for ten violins at $390 per unit. For this purpose, total relevant cost per unit (given the costs stated above) is:

Orange Computer Co. is quickly becoming a major player in the personal computer market. The company currently has multiple companies producing products that go into an Orange computer. This practice of having an outside firm provide a function for Orange Computer Co. is called:

In deciding between alternative choices for a given situation, managers usually employ a five-step process. Which of the following is not a step in the decision-making process?

Diamond is thinking of dropping Product Line C because it is reporting an operating loss. Assuming the company drops Product Line C and does not replace it, operating income for the firm will:

Which of the following statements regarding a joint production process is NOT true?

All the following are characteristic of relevant costs except:

A small company makes only two products with the following production constraints representing two machines and their maximum availability: If the profit equation is Z = $4X + $2Y, the maximum possible profit is:

Variable costs will generally be relevant for decision making because they:

The machine-hour constraint for Harrington's linear program is:

Relevant or differential cost analysis:

A decision bias is an inherent tendency of most decision makers that leads to incorrect decisions. An example of decision bias is:

The cost(s) NOT relevant for this asset-replacement decision is/are:

The mixing constraint for the Keego linear program would be:

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

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

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

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

Done on a regular basis, relevant cost pricing in special order decisions can erode normal pricing policies and lead to:

What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?

Assume that the Violin Division was evaluating whether or not it would accept a special sales order for ten violins at $390 per unit. For this purpose, total relevant cost per unit (given the costs stated above) is:

Orange Computer Co. is quickly becoming a major player in the personal computer market. The company currently has multiple companies producing products that go into an Orange computer. This practice of having an outside firm provide a function for Orange Computer Co. is called:

In deciding between alternative choices for a given situation, managers usually employ a five-step process. Which of the following is not a step in the decision-making process?

Diamond is thinking of dropping Product Line C because it is reporting an operating loss. Assuming the company drops Product Line C and does not replace it, operating income for the firm will:

Which of the following statements regarding a joint production process is NOT true?

All the following are characteristic of relevant costs except:

A small company makes only two products with the following production constraints representing two machines and their maximum availability: If the profit equation is Z = $4X + $2Y, the maximum possible profit is:

Variable costs will generally be relevant for decision making because they:

The machine-hour constraint for Harrington's linear program is:

Relevant or differential cost analysis:

A decision bias is an inherent tendency of most decision makers that leads to incorrect decisions. An example of decision bias is:

The cost(s) NOT relevant for this asset-replacement decision is/are:

The mixing constraint for the Keego linear program would be:

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

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

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

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