Question 1

An item's book value is the historical cost plus accumulated amortization.

Accepted Answer

A) True 
 B)False  False

Question 2

How does a manager go about choosing which of three products to produce and sell when each product uses a single machine with a limited capacity?

Accepted Answer

Management should attempt to maximize output from the machine which is the limited resource.This involves maximizing the contribution margin per unit of the scarce resource.First of all, management needs to determine the contribution margin of each of the three products.Then, the time that it takes to produce a unit of each of the three products should be determined.Then, a contribution margin per machine hour can be calculated.The first product that should be produced is the one with the highest contribution margin per machine hour.

Question 3

Axle and Wheel Manufacturing is approached by a European customer to fill a one-time-only special order for a product similar to one offered to domestic customers.The following per unit data apply for sales to regular customers:
   Axle and Wheel Manufacturing has excess capacity.Required:
a.What is the full cost of the product per unit?
b.What is the contribution margin per unit?
c.Which costs are relevant for making the decision regarding this one-time-only special order? Why?
d.For Axle and Wheel Manufacturing, what is the minimum acceptable price of this one-time-only special order?
e.For this one-time-only special order, should Axle and Wheel Manufacturing consider a price of $100 per unit? Why or why not?

Accepted Answer

a.$124
b.$114 = Selling price $186 - Variable costs ($33 + $15 + $24).
c.Relevant costs for decision making are those costs that differ between alternatives, which in this situation are the incremental costs.The incremental costs total $72 = Variable costs ($33 + $15 + $24).
d.The minimum acceptable price is $72 = Variable costs ($33 + $15 + $24), which are the incremental costs in the short term.
e.Yes, because this price is greater than the minimum acceptable price of this special order determined in (d).

Question 4

Use the information below to answer the following question(s).Northwoods manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $90 per table, consisting of 80% variable costs and 20% fixed costs.The company has surplus capacity available.It is Northwoods' policy to add a 50% markup to full costs.
-Northwoods is invited to bid on a one-time-only special order to supply 100 rustic tables.What is the lowest price Northwoods should bid on this special order?

Accepted Answer

A) $6,300 
B) $7,200 
C) $10,800 
D) $13,500 
E) $9,000 
A) $6,300 
B) $7,200 
C) $10,800 
D) $13,500 
E) $9,000

Question 5

Are relevant revenues and relevant costs the only information needed by managers to select among alternatives? Explain using examples.

Accepted Answer

No, relevant revenues and costs provide

Question 6

The last step in the decision process is normally to

Accepted Answer

A) evaluate and explain outcomes. 
B) make assumptions and predictions. 
C) choose alternatives. 
D) perform quantitative analysis. 
E) gather information. 
A) evaluate and explain outcomes. 
B) make assumptions and predictions. 
C) choose alternatives. 
D) perform quantitative analysis. 
E) gather information.

Question 7

A client in another province needs immediate help in solving a personnel training problem in the shipping department.Match each activity on the basis of its relationship with this consulting engagement.Items may have multiple classifications.
A)Relevant Costs
B)Sunk, Irrelevant Costs
C)Opportunity, Irrelevant Costs
D)Opportunity Cost
E)Irrelevant Costs
F)Sunk Costs
-Round-trip transportation for each staff member is $500

Accepted Answer

The answer of A client in another province needs immediate...

Question 8

Answer the following question(s)using the information below.Jim's 5-year-old Geo Prizm requires repairs estimated at $3,000 to make it road worthy again.His friend, Julie, suggested that he should buy a 5-year-old used Honda Civic instead for $3,000 cash.Julie estimated the following costs for the two cars:
  
-The cost NOT relevant for this decision is the

Accepted Answer

A) acquisition cost of the Geo Prizm. 
B) acquisition cost of the Honda Civic. 
C) repairs to the Geo Prizm. 
D) annual operating costs of the Honda Civic. 
E) annual operating costs of the Geo Prizm. 
A) acquisition cost of the Geo Prizm. 
B) acquisition cost of the Honda Civic. 
C) repairs to the Geo Prizm. 
D) annual operating costs of the Honda Civic. 
E) annual operating costs of the Geo Prizm.

Question 9

Which of the following is NOT one of the steps involved in linear programming?

Accepted Answer

A) determining the objective 
B) determining the technical coefficients 
C) computing the optimal solution 
D) determining the relevant and irrelevant costs 
E) specifying the constraints 
A) determining the objective 
B) determining the technical coefficients 
C) computing the optimal solution 
D) determining the relevant and irrelevant costs 
E) specifying the constraints

Question 10

Anticipated future costs that differ with alternative courses of action are known as relevant costs.

Accepted Answer

A) True 
 B)False

Question 11

Answer the following question(s)using the information below.Speedy Dress Manufacturing has two workstations, cutting and finishing.The cutting station is limited by the speed of operating the cutting machine.Finishing is limited by the speed of the workers.Finishing normally waits for work from cutting.Each department works an eight-hour day.If cutting begins work two hours earlier than finishing each day, the two departments generally finish their work at about the same time.Not only does this eliminate the bottleneck, but also it increases finished units produced each day by 160 units.All units produced can be sold even though the change increases inventory stock by 20% from 400 units.The cost of operating the cutting department two more hours each day is $1,600.The contribution margin of the finished products is $6 each.Inventory carrying costs are $0.40 per unit per day.
-What is the change in the daily contribution margin if the change is made?

Accepted Answer

A) $(608) 
B) $(634) 
C) $(672) 
D) $800 
E) $960 
A) $(608) 
B) $(634) 
C) $(672) 
D) $800 
E) $960

Question 12

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is

Accepted Answer

A) focused on short-term performance. 
B) based solely on quantitative factors. 
C) not consistent with the decision model. 
D) consistent with the decision model. 
E) based only on future costs. 
A) focused on short-term performance. 
B) based solely on quantitative factors. 
C) not consistent with the decision model. 
D) consistent with the decision model. 
E) based only on future costs.

Question 13

In linear programming, the goals of management are expressed in

Accepted Answer

A) an objective function. 
B) constraints. 
C) operating policies. 
D) business functions. 
E) a mathematical inequality or equality. 
A) an objective function. 
B) constraints. 
C) operating policies. 
D) business functions. 
E) a mathematical inequality or equality.

Question 14

Gold River Cabinets is approached by Ms.Mary Wong, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers.The following per unit data apply for sales to regular customers:
   Gold River Cabinets has excess capacity.Ms.Wong wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.Required:
a.For Gold River Cabinets, what is the minimum acceptable price of this one-time-only special order?
b.Other than price, what other items should Gold River Cabinets consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?

Accepted Answer

a.$255 = Variable costs ($90 + $105 + $3

Question 15

Describes the steps involved in solving a linear programming problem.

Accepted Answer

Step 1: Determine the objectiv

Question 16

Which of the following should management consider to avoid the pitfalls of relevant-cost analysis?

Accepted Answer

A) Consider all current revenues and costs. 
B) Include any item of revenue or cost that is either an expected future revenue or expected future cost, and, differs between the alternatives. 
C) Historic revenues and costs for items that differ according to alternatives should be considered. 
D) Assume that all fixed costs are irrelevant. 
E) Assume that all variable costs are relevant. 
A) Consider all current revenues and costs. 
B) Include any item of revenue or cost that is either an expected future revenue or expected future cost, and, differs between the alternatives. 
C) Historic revenues and costs for items that differ according to alternatives should be considered. 
D) Assume that all fixed costs are irrelevant. 
E) Assume that all variable costs are relevant.

Question 17

Clinton Company sells two items, product A and product B.The company is considering dropping product B.It is expected that sales of product A will increase by 40% as a result.Dropping product B will allow the company to cancel its monthly equipment rental costing $100 per month.The other existing equipment will be used for additional production of product A.One employee earning $200 per month can be terminated if product B production is dropped.Clinton's other fixed costs are allocated and will continue regardless of the decision made.A condensed, budgeted monthly income statement with both products follows:
   Required:
Prepare an incremental analysis to determine the financial effect of dropping product B.

Accepted Answer

Incremental change i

Question 18

Anchor Sign Company manufactures signs from direct materials to the finished product.This is an example of which of the following?

Accepted Answer

A) insourcing 
B) outsourcing 
C) product needs analysis 
D) product specialization 
E) utilization of idle facilities 
A) insourcing 
B) outsourcing 
C) product needs analysis 
D) product specialization 
E) utilization of idle facilities

Question 19

Managers tend to favour the alternative that makes their performance look best.This leads to conflicts between which of the following?

Accepted Answer

A) the status quo and the chosen alternative 
B) the decision model and the performance evaluation model 
C) the constraining factor and the performance evaluation model 
D) gathering the required information and the performance evaluation model 
E) the accrual accounting model and the performance evaluation model 
A) the status quo and the chosen alternative 
B) the decision model and the performance evaluation model 
C) the constraining factor and the performance evaluation model 
D) gathering the required information and the performance evaluation model 
E) the accrual accounting model and the performance evaluation model

Question 20

Why is the book value of old equipment irrelevant to the equipment replacement decision?

Accepted Answer

The book value of old equipmen

An item's book value is the historical cost plus accumulated amortization.

How does a manager go about choosing which of three products to produce and sell when each product uses a single machine with a limited capacity?

Are relevant revenues and relevant costs the only information needed by managers to select among alternatives? Explain using examples.

The last step in the decision process is normally to

Which of the following is NOT one of the steps involved in linear programming?

Anticipated future costs that differ with alternative courses of action are known as relevant costs.

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is

In linear programming, the goals of management are expressed in

Describes the steps involved in solving a linear programming problem.

Which of the following should management consider to avoid the pitfalls of relevant-cost analysis?

Anchor Sign Company manufactures signs from direct materials to the finished product.This is an example of which of the following?

Managers tend to favour the alternative that makes their performance look best.This leads to conflicts between which of the following?

Why is the book value of old equipment irrelevant to the equipment replacement decision?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 11: Decision Making and Relevant Information

An item's book value is the historical cost plus accumulated amortization.

How does a manager go about choosing which of three products to produce and sell when each product uses a single machine with a limited capacity?

Are relevant revenues and relevant costs the only information needed by managers to select among alternatives? Explain using examples.

The last step in the decision process is normally to

Which of the following is NOT one of the steps involved in linear programming?

Anticipated future costs that differ with alternative courses of action are known as relevant costs.

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is

In linear programming, the goals of management are expressed in

Describes the steps involved in solving a linear programming problem.

Which of the following should management consider to avoid the pitfalls of relevant-cost analysis?

Anchor Sign Company manufactures signs from direct materials to the finished product.This is an example of which of the following?

Managers tend to favour the alternative that makes their performance look best.This leads to conflicts between which of the following?

Why is the book value of old equipment irrelevant to the equipment replacement decision?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters