Question 1

Constraints may include:

Accepted Answer

A) the availability of direct materials in manufacturing 
B) linear square feet of display space for a retailer 
C) direct labor in the service industry 
D) All of these answers are correct. 
A) the availability of direct materials in manufacturing 
B) linear square feet of display space for a retailer 
C) direct labor in the service industry 
D) All of these answers are correct.

Question 2

Answer the following questions using the information below:
Victoria, Inc., is considering replacing a machine. The following data are available:
  
-The difference between keeping the old machine and replacing the old machine is:

Accepted Answer

A) $74,000 in favor of keeping the old machine 
B) $24,000 in favor of keeping the old machine 
C) $74,000 in favor of replacing the old machine 
D) $24,000 in favor of replacing the old machine 
A) $74,000 in favor of keeping the old machine 
B) $24,000 in favor of keeping the old machine 
C) $74,000 in favor of replacing the old machine 
D) $24,000 in favor of replacing the old machine

Question 3

Decisions about whether a producer of goods or services will insource or outsource are also called make-or-buy decisions.

Accepted Answer

A) True 
 B)False

Question 4

All corporate-office allocated costs should be included in relevant-cost analysis.

Accepted Answer

A) True 
 B)False

Question 5

Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $3.00 and $3.60 respectively. Normal production is 200,000 wheels per year.
A supplier offers to make the wheels at a price of $8 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $84,000 of fixed manufacturing overhead currently being charged to the wheels will have to be absorbed by other products.
Required:
a. Prepare an incremental analysis for the decision to make or buy the wheels.
b. Should Sarasota Bicycles buy the wheels from the outside supplier? Justify your answer.

Accepted Answer

@#IMG-DLM& Variable manufacturing costs

Question 6

Answer the following questions using the information below:
The management accountant for Giada's Book Store has prepared the following income statement for the most current year:
  
-If the travel book line had been discontinued, corporate profits for the current year would have decreased by:

Accepted Answer

A) $35,000 
B) $14,000 
C) $13,000 
D) $6,000 
A) $35,000 
B) $14,000 
C) $13,000 
D) $6,000

Question 7

Kirkland Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:
   Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 if Kirkland accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated.
Required:
a. What is the relevant per unit cost for the original part?
b. Which alternative is best for Kirkland Company? By how much?

Accepted Answer

@#IMG-DLM& @#IMG-DLM& The best

Question 8

When capacity is constrained, relevant costs equal incremental costs plus opportunity costs.

Accepted Answer

A) True 
 B)False

Question 9

A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses.

Accepted Answer

A) True 
 B)False

Question 10

The amount paid to purchase equipment last year is an example of a sunk cost.

Accepted Answer

A) True 
 B)False

Question 11

Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

Accepted Answer

A) True 
 B)False

Question 12

Ruttles Circuit Company manufactures circuit boards for other firms. Management is attempting to search for ways to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange the production floor next year. Using the information below regarding current operations and the new proposal, which of the following decisions should management accept?

Accepted Answer

A) Do not change the production floor. 
B) Rearrange the production floor. 
C) Either, because it makes no difference to the employees. 
D) It doesn't matter because the costs incurred will remain the same. 
A) Do not change the production floor. 
B) Rearrange the production floor. 
C) Either, because it makes no difference to the employees. 
D) It doesn't matter because the costs incurred will remain the same.

Question 13

If Wharton Corporation does NOT use one of its limited resources in the best possible way, the lost contribution to income could be called a(n):

Accepted Answer

A) variable cost 
B) fixed cost 
C) opportunity cost 
D) sunk cost 
A) variable cost 
B) fixed cost 
C) opportunity cost 
D) sunk cost

Question 14

Answer the following questions using the information below:
Melodee's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars:
  
-The maximum price that Melodee's Preserves should be willing to pay for the decorative jars is:

Accepted Answer

A) $0.28 per jar 
B) $0.38 per jar 
C) $0.72 per jar 
D) $1.00 per jar 
A) $0.28 per jar 
B) $0.38 per jar 
C) $0.72 per jar 
D) $1.00 per jar

Question 15

Linear programming is a tool that maximizes total contribution margin of a mix of products with multiple constraints.

Accepted Answer

A) True 
 B)False

Question 16

Revenues that remain the same for two alternatives being examined are relevant revenues.

Accepted Answer

A) True 
 B)False

Question 17

Assume you are a sophomore in college and are committed to earning an undergraduate degree. Your current decision is whether to finish college in four consecutive years or take a year off and work for some extra cash.
a. Identify at least two revenues or costs that are relevant to making this decision. Explain why each is relevant.
b. Identify at least two costs that would be considered sunk costs for this decision.
c. Comment on at least one qualitative consideration for this decision.

Accepted Answer

a. Relevant revenues/costs are those tha

Question 18

Answer the following questions using the information below:
Rambo Company has three products, A, B, and C. The following information is available:
  
-Rambo Company is thinking of dropping Product C because it is reporting a loss. Assuming Rambo drops Product C and does NOT replace it, operating income will:

Accepted Answer

A) increase by $400 
B) increase by $4,000 
C) decrease by $5,000 
D) decrease by $9,400 
A) increase by $400 
B) increase by $4,000 
C) decrease by $5,000 
D) decrease by $9,400

Question 19

A company is considering adding a fourth product to use available capacity. A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

Accepted Answer

A) True 
 B)False

Question 20

________ is relevant in a decision to replace equipment.

Accepted Answer

A) Cost of old equipment 
B) Book value of old equipment 
C) Accumulated depreciation on old equipment 
D) Future maintenance costs of old equipment 
A) Cost of old equipment 
B) Book value of old equipment 
C) Accumulated depreciation on old equipment 
D) Future maintenance costs of old equipment

Constraints may include:

Answer the following questions using the information below: Victoria, Inc., is considering replacing a machine. The following data are available: -The difference between keeping the old machine and replacing the old machine is:

Decisions about whether a producer of goods or services will insource or outsource are also called make-or-buy decisions.

All corporate-office allocated costs should be included in relevant-cost analysis.

Answer the following questions using the information below: The management accountant for Giada's Book Store has prepared the following income statement for the most current year: -If the travel book line had been discontinued, corporate profits for the current year would have decreased by:

When capacity is constrained, relevant costs equal incremental costs plus opportunity costs.

A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses.

The amount paid to purchase equipment last year is an example of a sunk cost.

Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

If Wharton Corporation does NOT use one of its limited resources in the best possible way, the lost contribution to income could be called a(n):

Linear programming is a tool that maximizes total contribution margin of a mix of products with multiple constraints.

Revenues that remain the same for two alternatives being examined are relevant revenues.

A company is considering adding a fourth product to use available capacity. A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

________ is relevant in a decision to replace equipment.

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

Constraints may include:

Answer the following questions using the information below: Victoria, Inc., is considering replacing a machine. The following data are available: -The difference between keeping the old machine and replacing the old machine is:

Decisions about whether a producer of goods or services will insource or outsource are also called make-or-buy decisions.

All corporate-office allocated costs should be included in relevant-cost analysis.

Answer the following questions using the information below: The management accountant for Giada's Book Store has prepared the following income statement for the most current year: -If the travel book line had been discontinued, corporate profits for the current year would have decreased by:

When capacity is constrained, relevant costs equal incremental costs plus opportunity costs.

A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses.

The amount paid to purchase equipment last year is an example of a sunk cost.

Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

If Wharton Corporation does NOT use one of its limited resources in the best possible way, the lost contribution to income could be called a(n):

Linear programming is a tool that maximizes total contribution margin of a mix of products with multiple constraints.

Revenues that remain the same for two alternatives being examined are relevant revenues.

A company is considering adding a fourth product to use available capacity. A relevant factor to consider is that corporate costs can now be allocated over four products rather than only three.

________ is relevant in a decision to replace equipment.

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