Question 1

Sunk costs:

Accepted Answer

A) are historical costs 
B) cannot be changed 
C) are never relevant 
D) all of the above 
A) are historical costs 
B) cannot be changed 
C) are never relevant 
D) all of the above

Question 2

Answer the following questions using the information below:
Schwimmer Lighting manufactures small flashlights and is considering raising the price by 50 cents a unit for the coming year. With a 50-cent price increase, demand is expected to fall by 6,000 units.
  
-When using the five-step decision process, which one of the following steps should be done first?

Accepted Answer

A) Obtain information 
B) Choose an alternative 
C) Evaluation and feedback 
D) Implementing the decision 
A) Obtain information 
B) Choose an alternative 
C) Evaluation and feedback 
D) Implementing the decision

Question 3

Answer the following questions using the information below:
Kolar Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Kolar Manufacturing has excess capacity. The following per unit data apply for sales to regular customers:
  
-For Kolar Manufacturing, what is the minimum acceptable price of this special order?

Accepted Answer

A) $220 
B) $290 
C) $340 
D) $510 
A) $220 
B) $290 
C) $340 
D) $510

Question 4

A relevant revenue is a revenue that is a(n):

Accepted Answer

A) past revenue 
B) future revenue 
C) in-hand revenue 
D) earned revenue 
A) past revenue 
B) future revenue 
C) in-hand revenue 
D) earned revenue

Question 5

Avoidable variable and fixed costs should be evaluated when deciding whether to discontinue a product, product line, business segment, or customer.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Qualitative factors, because they are NOT measured numerically, are unimportant in the decision-making process.

Accepted Answer

A) True 
 B)False

Question 8

Answer the following questions using the information below:
Helmer's Rockers manufactures two models, Standard and Premium. Weekly demand is estimated to be 100 units of the Standard Model and 70 units of the Premium Model. The following per unit data apply:
  
-If there are 496 machine-hours available per week, how many rockers of each model should Jim Helmer produce to maximize profits?

Accepted Answer

A) 100 units of Standard and 49 units of Premium 
B) 72 units of Standard and 70 units of Premium 
C) 100 units of Standard and 70 units of Premium 
D) 85 units of Standard and 60 units of Premium 
A) 100 units of Standard and 49 units of Premium 
B) 72 units of Standard and 70 units of Premium 
C) 100 units of Standard and 70 units of Premium 
D) 85 units of Standard and 60 units of Premium

Question 9

An example of a qualitative factor for the decision-making process is:

Accepted Answer

A) customer satisfaction 
B) units sold 
C) material cost 
D) labor hours incurred 
A) customer satisfaction 
B) units sold 
C) material cost 
D) labor hours incurred

Question 10

Discontinuing unprofitable products will increase profitability:

Accepted Answer

A) if the resources no longer required by the discontinued product can be eliminated 
B) if capacity constraints are adjusted 
C) automatically 
D) when a large portion of the fixed costs are unavoidable 
A) if the resources no longer required by the discontinued product can be eliminated 
B) if capacity constraints are adjusted 
C) automatically 
D) when a large portion of the fixed costs are unavoidable

Question 11

Answer the following questions using the information below:
Pizza For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:
  
-Relevant costs for this decision include:

Accepted Answer

A) the original cost of the existing van 
B) accumulated depreciation 
C) the current salvage value 
D) the salvage value in 10 years 
A) the original cost of the existing van 
B) accumulated depreciation 
C) the current salvage value 
D) the salvage value in 10 years

Question 12

A relevant cost is a cost that is a (n):

Accepted Answer

A) future cost 
B) past cost 
C) sunk cost 
D) non-cash expense 
A) future cost 
B) past cost 
C) sunk cost 
D) non-cash expense

Question 13

When a firm has constrained capacity as opposed to surplus capacity, opportunity costs will be:

Accepted Answer

A) lower 
B) the same 
C) greater 
D) variable 
A) lower 
B) the same 
C) greater 
D) variable

Question 14

Answer the following questions using the information below:
Schwimmer Lighting manufactures small flashlights and is considering raising the price by 50 cents a unit for the coming year. With a 50-cent price increase, demand is expected to fall by 6,000 units.
  
-Would you recommend the 50-cent price increase?

Accepted Answer

A) No, because demand decreased. 
B) No, because the selling price increases. 
C) Yes, because contribution margin per unit increases. 
D) Yes, because operating profits increase. 
A) No, because demand decreased. 
B) No, because the selling price increases. 
C) Yes, because contribution margin per unit increases. 
D) Yes, because operating profits increase.

Question 15

When deciding whether to discontinue a segment of a business, relevant costs include all of the following EXCEPT:

Accepted Answer

A) fixed supervision costs that can be eliminated 
B) variable marketing costs per unit of product sold 
C) cost of goods sold 
D) future administrative costs that will continue 
A) fixed supervision costs that can be eliminated 
B) variable marketing costs per unit of product sold 
C) cost of goods sold 
D) future administrative costs that will continue

Question 16

A segment has the following data:   What will be the incremental effect on net income if this segment is eliminated, assuming the fixed costs will be allocated to profitable segments?

Accepted Answer

A) $15,000 increase 
B) $155,000 decrease 
C) $140,000 decrease 
D) $145,000 decrease 
A) $15,000 increase 
B) $155,000 decrease 
C) $140,000 decrease 
D) $145,000 decrease

Question 17

Unit cost data can most mislead decisions by:

Accepted Answer

A) not computing fixed overhead costs 
B) computing labor and materials costs only 
C) computing administrative costs 
D) not computing unit costs at the same output level 
A) not computing fixed overhead costs 
B) computing labor and materials costs only 
C) computing administrative costs 
D) not computing unit costs at the same output level

Question 18

When making decisions:

Accepted Answer

A) quantitative factors are the most important 
B) qualitative factors are the most important 
C) appropriate weight must be given to both quantitative and qualitative factors 
D) both quantitative and qualitative factors are unimportant 
A) quantitative factors are the most important 
B) qualitative factors are the most important 
C) appropriate weight must be given to both quantitative and qualitative factors 
D) both quantitative and qualitative factors are unimportant

Question 19

Explain why sunk costs are not considered relevant when choosing among alternatives.

Accepted Answer

Amounts that remain the same among alter

Question 20

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are:   Current monthly sales are 190,000 units at $30.00 each. Q, Inc., has contacted Zephram Corporation about purchasing 2,000 units at $24.00 each. Current sales would not be affected by the one-time-only special order. What is Zephram's change in operating profits if the one-time-only special order is accepted?

Accepted Answer

A) $14,800 increase 
B) $17,200 increase 
C) $22,000 increase 
D) $33,200 increase 
A) $14,800 increase 
B) $17,200 increase 
C) $22,000 increase 
D) $33,200 increase

Sunk costs:

A relevant revenue is a revenue that is a(n):

Avoidable variable and fixed costs should be evaluated when deciding whether to discontinue a product, product line, business segment, or customer.

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

Qualitative factors, because they are NOT measured numerically, are unimportant in the decision-making process.

An example of a qualitative factor for the decision-making process is:

Discontinuing unprofitable products will increase profitability:

A relevant cost is a cost that is a (n):

When a firm has constrained capacity as opposed to surplus capacity, opportunity costs will be:

When deciding whether to discontinue a segment of a business, relevant costs include all of the following EXCEPT:

A segment has the following data: What will be the incremental effect on net income if this segment is eliminated, assuming the fixed costs will be allocated to profitable segments?

Unit cost data can most mislead decisions by:

When making decisions:

Explain why sunk costs are not considered relevant when choosing among alternatives.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 11: Decision Making and Relevant Information

Sunk costs:

A relevant revenue is a revenue that is a(n):

Avoidable variable and fixed costs should be evaluated when deciding whether to discontinue a product, product line, business segment, or customer.

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

Qualitative factors, because they are NOT measured numerically, are unimportant in the decision-making process.

An example of a qualitative factor for the decision-making process is:

Discontinuing unprofitable products will increase profitability:

A relevant cost is a cost that is a (n):

When a firm has constrained capacity as opposed to surplus capacity, opportunity costs will be:

When deciding whether to discontinue a segment of a business, relevant costs include all of the following EXCEPT:

A segment has the following data: What will be the incremental effect on net income if this segment is eliminated, assuming the fixed costs will be allocated to profitable segments?

Unit cost data can most mislead decisions by:

When making decisions:

Explain why sunk costs are not considered relevant when choosing among alternatives.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters