Exam 8: Using Accounting Information to Make Managerial Decisions

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In evaluating the relevance of specific information,the decision maker must know

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If regular sales are given up to take a special order,the lost contribution margin on the regular sales must be subtracted from the contribution margin of the special order to arrive at the total impact on operating income.

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The contribution margin of a particular segment less any direct fixed costs is called

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Ellis Dover is a scout for a Major League Baseball team based in Phoenix,Arizona.Ellis needs to travel to Los Angeles,California on June 1 to perform a variety of professional functions prior to the team travelling to Los Angeles to play.If Ellis flies,he could catch a 6 a.m.flight on June 1.In order to perform all of his professional responsibilities,Ellis will need to spend the night and catch a flight on June 2nd to return to Phoenix.If Ellis flies,he will need to rent a car for $38 per day.To cover meals and other incidental expenses,Ellis will receive $45 per day per diem for each day he works out of town.Flights between Phoenix and Los Angeles can be purchased for $89 one way. Phoenix is approximately 300 miles from Los Angeles,a 5-hour drive at speed limits permitted on the freeways connecting the two cities.If he drives from Phoenix to Los Angeles,Ellis would need to leave the afternoon of May 31 and would be reimbursed $.50 per mile.He would need to spend 2 nights in a hotel,the night of May 31 and the night of June 1.He would return to Phoenix by car on June 2nd.The hotel used by the team charges $160 per night.What is the incremental cost of driving over flying?

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Which of the following is a reason a company would be willing to accept new business at a loss?

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Channing Company is a large internet retailer with fulfillment warehouses in numerous locations throughout the U.S.One of Channing's warehouses has been showing losses over several quarters,and management is considering closing the warehouse.If the warehouse is closed,only the warehouse manager will be retained by Channing.The warehouse manager's annual salary is $65,000.The warehouse fixtures and equipment have no resale value.Following is the most recent income statement for the warehouse: Channing Company is a large internet retailer with fulfillment warehouses in numerous locations throughout the U.S.One of Channing's warehouses has been showing losses over several quarters,and management is considering closing the warehouse.If the warehouse is closed,only the warehouse manager will be retained by Channing.The warehouse manager's annual salary is $65,000.The warehouse fixtures and equipment have no resale value.Following is the most recent income statement for the warehouse:   What would be the impact on Channing's overall operating income if the warehouse is eliminated? What would be the impact on Channing's overall operating income if the warehouse is eliminated?

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Which of the following statements is true?

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Depreciation on a factory machine is an example of which of the following types of cost?

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