Question 1

The periodic cost of equipment which is spread over the future periods in which the equipment is expected to be used is called

Accepted Answer

A)  net book value. 
B)  current cost. 
C)  operating cost. 
D)  depreciation. 
A)  net book value. 
B)  current cost. 
C)  operating cost. 
D)  depreciation.

Question 2

In a sell or process further decision, joint costs must be analyzed to determine maximum profitability.

Accepted Answer

A) True 
 B)False

Question 3

The original cost of equipment less accumulated depreciation, which is the summation of depreciation charged to past periods.

Accepted Answer

The answer of The original cost of equipment less accumulated...

Question 4

A key factor in a make or buy decision is

Accepted Answer

A)  whether or not there are idle facilities. 
B)  the amount of the sunk costs. 
C)  gain or loss on the disposal of equipment. 
D)  the total joint costs. 
A)  whether or not there are idle facilities. 
B)  the amount of the sunk costs. 
C)  gain or loss on the disposal of equipment. 
D)  the total joint costs.

Question 5

Speck Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:
   The fixed factory overhead costs are unavoidable.
-Assume that Speck can buy 10,000 units of the part from another producer for $28 each. The current facilities could be used to make 10,000 units of a product that has a contribution margin of $10 per unit. No additional fixed costs would be incurred. Speck should

Accepted Answer

A)  make the new product and buy the part to earn an extra $6 per unit contribution to profit. 
B)  make the new product and buy the part to earn an extra $2 per unit contribution to profit. 
C)  continue to make the part to earn an extra $2 per unit contribution to profit. 
D)  continue to make the part to earn an extra $6 per unit contribution to profit. 
A)  make the new product and buy the part to earn an extra $6 per unit contribution to profit. 
B)  make the new product and buy the part to earn an extra $2 per unit contribution to profit. 
C)  continue to make the part to earn an extra $2 per unit contribution to profit. 
D)  continue to make the part to earn an extra $6 per unit contribution to profit.

Question 6

The Tippett Company manufactures two products, 12-07 and 19-01. Contribution margin per unit is determined as follows:   Total demand for 12-07 is 5,000 units and for 19-01 is 10,000 units.
Direct labour is a scarce resource. 40,000 direct labour hours are available during the year. Product 12-07 requires 5 direct labour hours per unit while product 19-01 requires 2 labour hours per unit.
How many units of 12-07 and 19-01 should the Royer Company produce?

Accepted Answer

Since direct labour hours are limited, t

Question 7

Pett Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:
   Of the fixed factory overhead costs, $15,000 is avoidable.
-Assuming no other use of their facilities, the highest price that Pett should be willing to pay for 5,000 units of the part is

Accepted Answer

A)  $105,000. 
B)  $70,000. 
C)  $85,000. 
D)  $60,000. 
A)  $105,000. 
B)  $70,000. 
C)  $85,000. 
D)  $60,000.

Question 8

Peters Company produces a product with the following unit cost.
   Fixed selling costs are $600,000 per year and variable selling costs are $1.50 per unit sold.
Production capacity is 500,000 units per year. However, the company expects to produce only 300,000 units next year. The product normally sells for $15 each. A customer has offered to buy 150,000 units for $10 each. The units would be sold in an area outside the market area currently served.
-Total incremental cost associated with the special order is

Accepted Answer

A)  $1,237,500. 
B)  $1,342,000. 
C)  $1,387,500. 
D)  $1,425,000. 
A)  $1,237,500. 
B)  $1,342,000. 
C)  $1,387,500. 
D)  $1,425,000.

Question 9

The Deerfield Company has annual productive capacity of 60,000 units per year. Budgeted operating results for 2006 are as follows:   A wholesaler from another country wants to buy 5,000 units at a price of $8 per unit. All fixed costs would remain within the relevant range. Variable manufacturing costs would be the same per unit but variable selling costs would increase by $2 per unit on the special order only.
a. Determine whether the company should produce the special order.
b. Assuming Deerfield's objective is to maximize profit, if the customer wants a special order of 20,000 units, should Deerfield accept or reject the special order?

Accepted Answer

a. @#IMG-DLM& Since the company would still be ope

Question 10

Hamilton, Inc. produces three products using a joint process which provides for $350,000 in joint costs. The products X, Y and Z can be sold at split-off or processed further and then sold. The production level for each product is 5,000 units. The following unit information is also available:
  
-Product Y

Accepted Answer

A)  should be processed further as this will increase profits by $30,000. 
B)  should be sold at split-off to maximize profits. 
C)  should be processed further to increase profits by $14 per unit. 
D)  can be processed further or sold at split-off, it makes no difference. 
A)  should be processed further as this will increase profits by $30,000. 
B)  should be sold at split-off to maximize profits. 
C)  should be processed further to increase profits by $14 per unit. 
D)  can be processed further or sold at split-off, it makes no difference.

Question 11

Knight, Inc. produces three products using a joint process which requires $115,000 in joint costs. The products A, B and C can be sold at split-off or processed further and then sold. The production level for each product is 8,000 units. The following unit information is also available:   Required:
a. Which products should be processed further?
b. Processing each product further will have what effect on profits?

Accepted Answer

a. Knight should pro

Question 12

Zahrt Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:   The Company has been approached by a supplier who claims it can sell Zahrt 10,000 units of the same part for $840,000.
Required:
a. Assuming there is no alternative use for the facilities, should Zahrt buy the part, and if so, how much money would be saved?
b. Assuming the facilities can be rented out for $110,000 per year, should Zahrt buy the part, and if so, how much money would be saved?

Accepted Answer

a. $20 + $34 + $24 = $78 × 10,000 units

Question 13

Abbey Company uses a joint process to produce products L, M and N. Each product may be sold at split-off or processed further and then sold. Joint processing costs for the year amounted to $500,000. Other information is presented below:   Required:
a. Which products, if any, should be processed further?
b. If all three products were processed further, what would be the effect on profits?

Accepted Answer

a. Product M should be processed further

Question 14

Buckner Company is considering replacing a machine that is presently used in the production of its product. The following data are available:  
-The total relevant costs to consider if the old machine is kept are

Accepted Answer

A)  $480,000. 
B)  $280,000. 
C)  $376,000. 
D)  $576,000. 
A)  $480,000. 
B)  $280,000. 
C)  $376,000. 
D)  $576,000.

Question 15

A cost that has already been incurred and is irrelevant to the decision-making process is a(n)

Accepted Answer

A)  opportunity cost. 
B)  replacement cost. 
C)  outlay cost. 
D)  sunk cost. 
A)  opportunity cost. 
B)  replacement cost. 
C)  outlay cost. 
D)  sunk cost.

Question 16

A cost that requires a cash disbursement.

Accepted Answer

The answer of A cost that requires a cash disbursement....

Question 17

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available:  
-Which of the data provided in the table is a sunk cost?

Accepted Answer

A)  The annual cash operating costs of the old machine 
B)  The annual cash operating costs of the replacement machine 
C)  The disposal value of the old machine 
D)  The original cost of the old machine 
A)  The annual cash operating costs of the old machine 
B)  The annual cash operating costs of the replacement machine 
C)  The disposal value of the old machine 
D)  The original cost of the old machine

Question 18

The salary foregone by a person who quits a job to start a business is an example of a(n)

Accepted Answer

A)  sunk cost. 
B)  opportunity cost. 
C)  amortizable cost. 
D)  outlay cost. 
A)  sunk cost. 
B)  opportunity cost. 
C)  amortizable cost. 
D)  outlay cost.

Question 19

Fixed costs that may be avoided in the future are

Accepted Answer

A)  unavoidable costs. 
B)  sunk costs. 
C)  relevant costs. 
D)  replacement costs. 
A)  unavoidable costs. 
B)  sunk costs. 
C)  relevant costs. 
D)  replacement costs.

Question 20

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available:  
-The total relevant costs to consider if the old machine is kept are

Accepted Answer

A)  $120,000. 
B)  $70,000. 
C)  $94,000. 
D)  $144,000. 
A)  $120,000. 
B)  $70,000. 
C)  $94,000. 
D)  $144,000.

The periodic cost of equipment which is spread over the future periods in which the equipment is expected to be used is called

In a sell or process further decision, joint costs must be analyzed to determine maximum profitability.

The original cost of equipment less accumulated depreciation, which is the summation of depreciation charged to past periods.

A key factor in a make or buy decision is

Buckner Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -The total relevant costs to consider if the old machine is kept are

A cost that has already been incurred and is irrelevant to the decision-making process is a(n)

A cost that requires a cash disbursement.

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -Which of the data provided in the table is a sunk cost?

The salary foregone by a person who quits a job to start a business is an example of a(n)

Fixed costs that may be avoided in the future are

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -The total relevant costs to consider if the old machine is kept are

Management Accounting and Management Decisions

Cost Behaviour and Cost-Volume Relationships

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Capital Budgeting Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Management Control in Decentralized Organizations

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Exam 9: Relevant Information and Decision Making: Production Decisions

The periodic cost of equipment which is spread over the future periods in which the equipment is expected to be used is called

In a sell or process further decision, joint costs must be analyzed to determine maximum profitability.

The original cost of equipment less accumulated depreciation, which is the summation of depreciation charged to past periods.

A key factor in a make or buy decision is

Buckner Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -The total relevant costs to consider if the old machine is kept are

A cost that has already been incurred and is irrelevant to the decision-making process is a(n)

A cost that requires a cash disbursement.

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -Which of the data provided in the table is a sunk cost?

The salary foregone by a person who quits a job to start a business is an example of a(n)

Fixed costs that may be avoided in the future are

Overland Company is considering replacing a machine that is presently used in the production of its product. The following data are available: -The total relevant costs to consider if the old machine is kept are

Management Accounting and Management Decisions

Cost Behaviour and Cost-Volume Relationships

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Capital Budgeting Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Management Control in Decentralized Organizations

Filters