Question 1

Separable costs are part of a joint process and cannot be exclusively identified with individual products.

Accepted Answer

A) True 
 B)False

Question 2

Strawberry Corporation has a joint process that produces three products: P,G and A.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $25,000.The production level for each product is 10,000 units.Other data follows:   Processing Product P beyond the split-off point will cause profits to ________.

Accepted Answer

A) increase $25,000 
B) increase $40,000 
C) increase $50,000 
D) increase $90,000 
A) increase $25,000 
B) increase $40,000 
C) increase $50,000 
D) increase $90,000

Question 3

Outsourcing is the purchase of products or services by a company from an outside supplier.

Accepted Answer

A) True 
 B)False

Question 4

Jeff Company produces a part that is used in the manufacture of one of its products.The annual costs associated with the production of 11,000 units of this part are as follows:
   A supplier is willing to sell 11,000 units of the part to Jeff Company for $12.50 per unit.When examining the indirect production costsfixed,Jeff Company determines $10,000 is avoidable.
Required: 
A)If there are no alternative uses for the facilities,should Jeff Company take advantage of the supplier's offer?
B)If Jeff Company decides to buy the part from the supplier,Jeff Company can rent out the idle facilities for $50,000 per year.Should Jeff Company take advantage of the supplier's offer?

Accepted Answer

A) Alternatives: Make part: ($25,000 + $

Question 5

Opportunity costs and outlay costs are widely used synonyms.

Accepted Answer

A) True 
 B)False

Question 6

Ernie Company is considering replacing a machine that is currently used in the production process.The ________ is irrelevant to the replacement decision.

Accepted Answer

A) cost of the new machine 
B) disposal value of old machine 
C) book value of old machine 
D) annual operating cost of old machine 
A) cost of the new machine 
B) disposal value of old machine 
C) book value of old machine 
D) annual operating cost of old machine

Question 7

Future costs are relevant in decision making when they ________.

Accepted Answer

A) exceed future revenues 
B) are not based on estimates 
C) differ between alternative courses of action 
D) are the same between alternative courses of action 
A) exceed future revenues 
B) are not based on estimates 
C) differ between alternative courses of action 
D) are the same between alternative courses of action

Question 8

When making a make-or-buy decision for a part,what items are relevant to the decision?

Accepted Answer

A) variable costs of making the part 
B) fixed costs that the company can avoid by not making the part 
C) rental income from idle plant when not making the part 
D) all of the above 
A) variable costs of making the part 
B) fixed costs that the company can avoid by not making the part 
C) rental income from idle plant when not making the part 
D) all of the above

Question 9

Match 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,$72,000 are avoidable.Today Company has offered to sell 5,000 units of the same part to Match for $86.40 per unit.Assuming there is no other use for the facilities,Match Company should ________.

Accepted Answer

A) make the part to save $24,000 
B) make the part to save $72,000 
C) buy the part to save $24,000 
D) buy the part to save $72,000 
A) make the part to save $24,000 
B) make the part to save $72,000 
C) buy the part to save $24,000 
D) buy the part to save $72,000

Question 10

BEE Company is considering the replacement of a machine that is presently used in production.Which of the following items are irrelevant to the replacement decision?

Accepted Answer

A) annual operating cost of the old machine 
B) original cost of the new machine 
C) disposal value of the old machine at time of replacement 
D) original cost of old machine 
A) annual operating cost of the old machine 
B) original cost of the new machine 
C) disposal value of the old machine at time of replacement 
D) original cost of old machine

Question 11

Future costs are relevant if they are the same under all feasible alternatives.

Accepted Answer

A) True 
 B)False

Question 12

In deciding whether to add or delete a product,the insurance expense associated with the custom-built equipment used to produce the product is an ________ cost.Assume the equipment will be sold if the company discontinues the product.

Accepted Answer

A) avoidable fixed 
B) avoidable variable 
C) unavoidable fixed 
D) unavoidable variable 
A) avoidable fixed 
B) avoidable variable 
C) unavoidable fixed 
D) unavoidable variable

Question 13

Watson Corporation manufactures two products,Simple and Complex.The following annual information was gathered:   Total annual fixed costs are $18,000.Assume Watson Corporation can produce and sell any mix of Simple or Complex at full capacity.It takes one hour to make one unit of Complex.However,Simple takes 50% longer to manufacture when compared to Complex.Only 120,000 hours of plant capacity are available.How many units of Simple and Complex should Watson Corporation produce and sell in a year to maximize profits?

Accepted Answer

A) an equal number of Simple and Complex 
B) 80,000 units of Simple and 0 units of Complex 
C) 0 units of Simple and 120,000 units of Complex 
D) either Simple or Complex; it does not matter 
A) an equal number of Simple and Complex 
B) 80,000 units of Simple and 0 units of Complex 
C) 0 units of Simple and 120,000 units of Complex 
D) either Simple or Complex; it does not matter

Question 14

Ford Company manufactures a part for its production cycle.The costs per unit for 10,000 units of the part are as follows:   The fixed factory overhead costs are unavoidable.Assuming no other use for the facilities,what is the highest price that Ford Company should be willing to pay for the part?

Accepted Answer

A) $35 
B) $41 
C) $45 
D) $51 
A) $35 
B) $41 
C) $45 
D) $51

Question 15

The cost of new equipment is relevant in deciding whether to keep or replace old equipment.

Accepted Answer

A) True 
 B)False

Question 16

If a company has excess capacity,the most it should be willing to pay for a part for a product that it currently makes would be the ________.

Accepted Answer

A) total costs of producing the part 
B) total variable costs of producing the part 
C) total fixed costs that can be avoided by buying the part 
D) total variable costs of producing the part plus total fixed costs that can be avoided by buying the part 
A) total costs of producing the part 
B) total variable costs of producing the part 
C) total fixed costs that can be avoided by buying the part 
D) total variable costs of producing the part plus total fixed costs that can be avoided by buying the part

Question 17

Lakers Company manufactures a part for its production cycle.The annual costs per unit for 5,000 units of the part are as follows:   The fixed factory overhead costs are unavoidable.Spalding Company has offered to sell 5,000 units of the same part to Lakers Company for $14 per unit.The facilities currently used for the part could be used to make 5,000 units annually of a new product that would contribute $5 a unit to fixed expenses.No additional fixed costs would be incurred with the new product.Lakers Company should ________.

Accepted Answer

A) make the part to save $1 per unit 
B) make the part to save $3 per unit 
C) make the new product and buy the part to save $1 per unit 
D) make the new product and buy the part to save $3 per unit 
A) make the part to save $1 per unit 
B) make the part to save $3 per unit 
C) make the new product and buy the part to save $1 per unit 
D) make the new product and buy the part to save $3 per unit

Question 18

Ring Corporation manufactures two types of tables: Small and Large.The following data is available:
   Total fixed costs are $9,600.Ring Corporation can sell a maximum of 1,000 units of each size of table.Machine hour capacity is 8,000 hours per year.
Required: 
A)Which table has the highest contribution margin per unit?
B)Which table has the highest contribution margin per machine hour?
C)How many tables of each size should be produced to maximize operating income?

Accepted Answer

A)The large table has the highest contri

Question 19

Schmidt Company makes three sizes of shirts: Small,Medium and Large.The company uses one assembly line that has a limit of 600 labor hours per week.Schmidt Company can sell all the shirts it can make under current operating capacity.The following information is available:
   Required: 
A)Determine the weekly contribution margin when all the labor hours are allotted to the shirts with the highest selling price per unit.
B)Determine the weekly contribution margin when all the labor hours are allotted to the shirts with the highest contribution margin per unit.
C)Determine the weekly contribution margin when all the labor hours are allotted to the shirts with the highest contribution margin per labor hour.

Accepted Answer

A)Large shirts have the highest selling

Question 20

Joint products should be processed beyond the split-off point if ________.

Accepted Answer

A) incremental expenses from further processing exceed incremental revenues from further processing 
B) sale of the product is guaranteed 
C) additional revenue from further processing exceeds additional expenses from further processing 
D) the marginal cost of the joint product exceeds the marginal revenue 
A) incremental expenses from further processing exceed incremental revenues from further processing 
B) sale of the product is guaranteed 
C) additional revenue from further processing exceeds additional expenses from further processing 
D) the marginal cost of the joint product exceeds the marginal revenue

Separable costs are part of a joint process and cannot be exclusively identified with individual products.

Outsourcing is the purchase of products or services by a company from an outside supplier.

Opportunity costs and outlay costs are widely used synonyms.

Ernie Company is considering replacing a machine that is currently used in the production process.The ________ is irrelevant to the replacement decision.

Future costs are relevant in decision making when they ________.

When making a make-or-buy decision for a part,what items are relevant to the decision?

BEE Company is considering the replacement of a machine that is presently used in production.Which of the following items are irrelevant to the replacement decision?

Future costs are relevant if they are the same under all feasible alternatives.

In deciding whether to add or delete a product,the insurance expense associated with the custom-built equipment used to produce the product is an ________ cost.Assume the equipment will be sold if the company discontinues the product.

Ford Company manufactures a part for its production cycle.The costs per unit for 10,000 units of the part are as follows: The fixed factory overhead costs are unavoidable.Assuming no other use for the facilities,what is the highest price that Ford Company should be willing to pay for the part?

The cost of new equipment is relevant in deciding whether to keep or replace old equipment.

If a company has excess capacity,the most it should be willing to pay for a part for a product that it currently makes would be the ________.

Joint products should be processed beyond the split-off point if ________.

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 6: Relevant Information for Decision Making With a Focus

Separable costs are part of a joint process and cannot be exclusively identified with individual products.

Outsourcing is the purchase of products or services by a company from an outside supplier.

Opportunity costs and outlay costs are widely used synonyms.

Ernie Company is considering replacing a machine that is currently used in the production process.The ________ is irrelevant to the replacement decision.

Future costs are relevant in decision making when they ________.

When making a make-or-buy decision for a part,what items are relevant to the decision?

BEE Company is considering the replacement of a machine that is presently used in production.Which of the following items are irrelevant to the replacement decision?

Future costs are relevant if they are the same under all feasible alternatives.

In deciding whether to add or delete a product,the insurance expense associated with the custom-built equipment used to produce the product is an ________ cost.Assume the equipment will be sold if the company discontinues the product.

Ford Company manufactures a part for its production cycle.The costs per unit for 10,000 units of the part are as follows: The fixed factory overhead costs are unavoidable.Assuming no other use for the facilities,what is the highest price that Ford Company should be willing to pay for the part?

The cost of new equipment is relevant in deciding whether to keep or replace old equipment.

If a company has excess capacity,the most it should be willing to pay for a part for a product that it currently makes would be the ________.

Joint products should be processed beyond the split-off point if ________.

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters