Question 1

Why does a special order decision frequently ignore fixed overhead?

Accepted Answer

Special-order decisions are, by definiti

Question 2

Piersall Company makes a variety of paper products. One product is 20 lb copier paper, packaged 5,000 sheets to a box. One box normally sells for $18. A large bank offered to purchase 3,000 boxes at $14 per box. Costs per box are as follows:   No variable marketing costs would be incurred on the order. The company is operating significantly below the maximum productive capacity. No fixed costs are avoidable.
Should Piersall accept the order?

Accepted Answer

A)  Yes, income will increase by $6,000. 
B)  Yes, income will increase by $9,000. 
C)  No, income will decrease by $3,000. 
D)  No, income will decrease by $6,000. 
E)  It doesn't matter; there will be no impact on income. 
A)  Yes, income will increase by $6,000. 
B)  Yes, income will increase by $9,000. 
C)  No, income will decrease by $3,000. 
D)  No, income will decrease by $6,000. 
E)  It doesn't matter; there will be no impact on income.

Question 3

The following information relates to a product produced by Creamer Company:   Fixed selling costs are $500,000 per year, and variable selling costs are $12 per unit sold. Although production capacity is 600,000 units per year, the company expects to produce only 400,000 units next year. The product normally sells for $120 each. A customer has offered to buy 60,000 units for $90 each.
The incremental cost per unit associated with the special order is

Accepted Answer

A)  $84. 
B)  $81. 
C)  $69. 
D)  $64. 
A)  $84. 
B)  $81. 
C)  $69. 
D)  $64.

Question 4

Brorsen, Inc., has just designed a new product with a target cost of $64. Brorsen requires new product to have a profit of 20%. What is the target price for the new product?

Accepted Answer

A)  $64 
B)  $12.80 
C)  $320 
D)  $80 
E)  $53 
A)  $64 
B)  $12.80 
C)  $320 
D)  $80 
E)  $53

Question 5

A decision that focuses on whether a specially priced order should be accepted or rejected is what kind of decision?

Accepted Answer

A)  relevant 
B)  make-or-buy 
C)  sell-or-process-further 
D)  special-order 
E)  keep-or-drop 
A)  relevant 
B)  make-or-buy 
C)  sell-or-process-further 
D)  special-order 
E)  keep-or-drop

Question 6

Refer to Figure 13-9. What is the contribution margin per hour of machine time for Test C?

Accepted Answer

A)  $48 
B)  $35 
C)  $13 
D)  $16 
E)  $24 
A)  $48 
B)  $35 
C)  $13 
D)  $16 
E)  $24

Question 7

Boone Products had the following unit costs:   A one-time customer has offered to buy 2,000 units at a special price of $48 per unit. Because of capacity constraints, 1,000 units will need to be produced during overtime. Overtime premium is $8 per unit. How much additional profit or loss will be generated by accepting the special order?

Accepted Answer

A)  $30,000 loss 
B)  $4,000 loss 
C)  $24,000 loss 
D)  $4,000 profit 
A)  $30,000 loss 
B)  $4,000 loss 
C)  $24,000 loss 
D)  $4,000 profit

Question 8

Figure 13-7.Ring Company makes telephones. Currently, Ring makes all components of the telephones in-house. An outside company has offered to supply one component, part number X76, for $12 each. Ring uses 22,000 of these components per year. Costs of X76 are as follows:
  
-Refer to Figure 13-7. Suppose that 30% of the fixed overhead is avoidable if part X76 is not made by Ring. Should Ring purchase the part from the outside supplier?

Accepted Answer

A)  No, income will decrease by $71,500. 
B)  No, income will decrease by $15,000. 
C)  Yes, income will increase by $74,500. 
D)  No, income will decrease by $10,500. 
E)  Yes, income will increase by $10,500. 
A)  No, income will decrease by $71,500. 
B)  No, income will decrease by $15,000. 
C)  Yes, income will increase by $74,500. 
D)  No, income will decrease by $10,500. 
E)  Yes, income will increase by $10,500.

Question 9

A segment margin is always greater than or equal to zero.

Accepted Answer

A) True 
 B)False

Question 10

Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units:   The company has the capacity to produce 30,000 units. The product regularly sells for $40. A wholesaler has offered to pay $32 per unit for 2,000 units.
If the firm chooses to accept the special order and reject some regular sales, the effect on operating income would be

Accepted Answer

A)  a $20,000 increase. 
B)  a $16,000 decrease. 
C)  a $4,000 increase. 
D)  $-0-. 
A)  a $20,000 increase. 
B)  a $16,000 decrease. 
C)  a $4,000 increase. 
D)  $-0-.

Question 11

Resources that are acquired in advance of usage are flexible resources.

Accepted Answer

A) True 
 B)False

Question 12

Match each statement with the correct item below.
-Keep-or-drop decisions

Accepted Answer

A) the difference in total cost between the alternatives in a decision 
B) determine whether or not a segment should be kept or dropped 
C) limited resources and limited demand for each product 
D) a specific set of procedures that produces a decision 
E) the point that products that have common processes and costs of production become distinguishable
F)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)products that have common processes and costs of production up to a point
I)past costs that cannot be affected by future decisions
J)a percentage applied to the base cost to cover other costs plus profit
K)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further 
A) the difference in total cost between the alternatives in a decision 
B) determine whether or not a segment should be kept or dropped 
C) limited resources and limited demand for each product 
D) a specific set of procedures that produces a decision 
E) the point that products that have common processes and costs of production become distinguishable
F)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)products that have common processes and costs of production up to a point
I)past costs that cannot be affected by future decisions
J)a percentage applied to the base cost to cover other costs plus profit
K)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further

Question 13

Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units:   The company has the capacity to produce 90,000 units. The product regularly sells for $120. A wholesaler has offered to pay $110 per unit for 7,500 units. If the special order is accepted, the effect on operating income would be a

Accepted Answer

A)  $75,000 decrease. 
B)  $429,000 increase. 
C)  $495,000 increase. 
D)  $249,000 increase. 
A)  $75,000 decrease. 
B)  $429,000 increase. 
C)  $495,000 increase. 
D)  $249,000 increase.

Question 14

Match each statement with the correct item below.
-Joint products

Accepted Answer

A) the difference in total cost between the alternatives in a decision 
B) determine whether or not a segment should be kept or dropped 
C) limited resources and limited demand for each product 
D) a specific set of procedures that produces a decision 
E) the point that products that have common processes and costs of production become distinguishable
F)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)products that have common processes and costs of production up to a point
I)past costs that cannot be affected by future decisions
J)a percentage applied to the base cost to cover other costs plus profit
K)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further 
A) the difference in total cost between the alternatives in a decision 
B) determine whether or not a segment should be kept or dropped 
C) limited resources and limited demand for each product 
D) a specific set of procedures that produces a decision 
E) the point that products that have common processes and costs of production become distinguishable
F)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)products that have common processes and costs of production up to a point
I)past costs that cannot be affected by future decisions
J)a percentage applied to the base cost to cover other costs plus profit
K)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further

Question 15

Rippey Corporation manufactures a single product with the following unit costs for 5,000 units:
   Recently, a company approached Rippey Corporation about buying 1,000 units for $225. Currently, the models are sold to dealers for $412.50. Rippey's capacity is sufficient to produce the extra 1,000 units. No additional selling expenses would be incurred on the special order.
Required:

Accepted Answer

The answer of Rippey Corporation manufactures a single product with...

Question 16

Super Pet Supplies sets prices at cost plus 70% of cost. The cost of an aquarium start-up kit is $110. What price does Super Pet Supplies charge for the aquarium start-up kit?

Accepted Answer

A)  $195 
B)  $200 
C)  $187 
D)  $77 
E)  $180 
A)  $195 
B)  $200 
C)  $187 
D)  $77 
E)  $180

Question 17

_____________________ are simply those factors that are hard to put a number on, including things like political pressure and product safety.

Accepted Answer

The answer of _____________________ are simply those factors that are...

Question 18

Match each statement with the correct item below.
-Constraints

Accepted Answer

A) the difference in total cost between the alternatives in a decision 
B) determine whether or not a segment should be kept or dropped 
C) limited resources and limited demand for each product 
D) a specific set of procedures that produces a decision 
E) the point that products that have common processes and costs of production become distinguishable
F)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)products that have common processes and costs of production up to a point
I)past costs that cannot be affected by future decisions
J)a percentage applied to the base cost to cover other costs plus profit
K)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further 
A) the difference in total cost between the alternatives in a decision 
B) determine whether or not a segment should be kept or dropped 
C) limited resources and limited demand for each product 
D) a specific set of procedures that produces a decision 
E) the point that products that have common processes and costs of production become distinguishable
F)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)products that have common processes and costs of production up to a point
I)past costs that cannot be affected by future decisions
J)a percentage applied to the base cost to cover other costs plus profit
K)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further

Question 19

A cost that cannot be affected by any future action is called a(n) _______________.

Accepted Answer

The answer of A cost that cannot be affected by...

Question 20

Refer to Figure 13-10.

Accepted Answer

The answer of Refer to Figure 13-10.
  ...

Why does a special order decision frequently ignore fixed overhead?

Brorsen, Inc., has just designed a new product with a target cost of $64. Brorsen requires new product to have a profit of 20%. What is the target price for the new product?

A decision that focuses on whether a specially priced order should be accepted or rejected is what kind of decision?

Refer to Figure 13-9. What is the contribution margin per hour of machine time for Test C?

A segment margin is always greater than or equal to zero.

Resources that are acquired in advance of usage are flexible resources.

Match each statement with the correct item below. -Keep-or-drop decisions

Match each statement with the correct item below. -Joint products

Super Pet Supplies sets prices at cost plus 70% of cost. The cost of an aquarium start-up kit is $110. What price does Super Pet Supplies charge for the aquarium start-up kit?

_____________________ are simply those factors that are hard to put a number on, including things like political pressure and product safety.

Match each statement with the correct item below. -Constraints

A cost that cannot be affected by any future action is called a(n) _______________.

Refer to Figure 13-10.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 13: Short-Run Decision Making: Relevant Costing

Why does a special order decision frequently ignore fixed overhead?

Brorsen, Inc., has just designed a new product with a target cost of $64. Brorsen requires new product to have a profit of 20%. What is the target price for the new product?

A decision that focuses on whether a specially priced order should be accepted or rejected is what kind of decision?

Refer to Figure 13-9. What is the contribution margin per hour of machine time for Test C?

A segment margin is always greater than or equal to zero.

Resources that are acquired in advance of usage are flexible resources.

Match each statement with the correct item below. -Keep-or-drop decisions

Match each statement with the correct item below. -Joint products

Super Pet Supplies sets prices at cost plus 70% of cost. The cost of an aquarium start-up kit is $110. What price does Super Pet Supplies charge for the aquarium start-up kit?

_____________________ are simply those factors that are hard to put a number on, including things like political pressure and product safety.

Match each statement with the correct item below. -Constraints

A cost that cannot be affected by any future action is called a(n) _______________.

Refer to Figure 13-10.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters