Question 1

Ted owns a small body shop. His major costs include labour, parts, and rent. In the decision making process, these costs are always considered to be

Accepted Answer

A)  fixed. 
B)  qualitative factors. 
C)  quantitative factors. 
D)  variable. 
E)  relevant costs. 
A)  fixed. 
B)  qualitative factors. 
C)  quantitative factors. 
D)  variable. 
E)  relevant costs.

Question 2

The variation in total costs between two alternatives is known as

Accepted Answer

A)  differential cost. 
B)  analyzed cost. 
C)  irrelevant cost. 
D)  predictable cost. 
E)  expected cost. 
A)  differential cost. 
B)  analyzed cost. 
C)  irrelevant cost. 
D)  predictable cost. 
E)  expected cost.

Question 3

Divisional revenues which remain at the same level from year to year are known as relevant revenues.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following costs are never relevant in the decision-making process?

Accepted Answer

A)  fixed costs 
B)  historical costs 
C)  relevant costs 
D)  variable costs 
E)  opportunity costs 
A)  fixed costs 
B)  historical costs 
C)  relevant costs 
D)  variable costs 
E)  opportunity costs

Question 5

Managers tend to favour decision choices that make their current performance look better.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A computer system installed last year is an example of a(n)

Accepted Answer

A)  sunk cost. 
B)  relevant cost. 
C)  differential cost. 
D)  avoidable cost. 
E)  opportunity cost. 
A)  sunk cost. 
B)  relevant cost. 
C)  differential cost. 
D)  avoidable cost. 
E)  opportunity cost.

Question 8

Decisions on product mix involving multiple products, should be based on which of the following?

Accepted Answer

A)  the variable cost differential between the products 
B)  the differential selling prices between the products 
C)  fixed cost savings 
D)  the amount of idle capacity 
E)  individual product contribution margin totals 
A)  the variable cost differential between the products 
B)  the differential selling prices between the products 
C)  fixed cost savings 
D)  the amount of idle capacity 
E)  individual product contribution margin totals

Question 9

Collier 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 labour cost. The direct materials and direct labour cost per unit to make the wheels are $1.50 and $1.80, respectively. Normal production is 200,000 wheels per year.
A supplier offers to make the wheels at a price of $4 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $42,000 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 Collier Bicycles buy the wheels from the outside supplier? Justify your answer.

Accepted Answer

The answer of Collier Bicycles has been manufacturing its own...

Question 10

In linear programming a mathematical inequality or equality that must be appeased is known as

Accepted Answer

A)  an objective function. 
B)  a constraint. 
C)  an operating policy. 
D)  a business function. 
E)  the optimal solution. 
A)  an objective function. 
B)  a constraint. 
C)  an operating policy. 
D)  a business function. 
E)  the optimal solution.

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

The financial measures used to evaluate a manager's performance must be the same as those used to measure the performance of his/her department.

Accepted Answer

A) True 
 B)False

Question 13

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

The answer of Kirkland Company manufactures a part for use...

Question 14

Central Medical Supply Inc., a manufacturer of medical testing equipment, has $240,000 worth of an obsolete line of testing equipment. The obsolete equipment can be adapted to fit another line of testing equipment at a cost of $64,000; the market value would then be $136,000. However, Tripac offered to purchase the obsolete equipment as is for $88,000. What are the relevant figures above for management in their decision?

Accepted Answer

A)  ($240,000 + $64,000); ($88,000 - 0) 
B)  ($240,000 + $64,000); ($88,000 - 240,000) 
C)  ($240,000 + $64,000); ($88,000 + 240,000) 
D)  ($136,000 - $64,000); ($88,000 - 0) 
E)  ($136,000 - $64,000); ($88,000 - 240,000) 
A)  ($240,000 + $64,000); ($88,000 - 0) 
B)  ($240,000 + $64,000); ($88,000 - 240,000) 
C)  ($240,000 + $64,000); ($88,000 + 240,000) 
D)  ($136,000 - $64,000); ($88,000 - 0) 
E)  ($136,000 - $64,000); ($88,000 - 240,000)

Question 15

Answer the following question(s) using the information below.
Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:
   Of the fixed factory overhead costs, $30,000 is avoidable.
-Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming there is no other use for the facilities, Schmidt should

Accepted Answer

A)  make the part, as this would save $3 per unit. 
B)  buy the part, as this would save $3 per unit. 
C)  make the part, as this would save $4 per unit. 
D)  make the part, as this would save $1 per unit. 
E)  buy the part, as this would save $4 per unit. 
A)  make the part, as this would save $3 per unit. 
B)  buy the part, as this would save $3 per unit. 
C)  make the part, as this would save $4 per unit. 
D)  make the part, as this would save $1 per unit. 
E)  buy the part, as this would save $4 per unit.

Question 16

What is the opportunity cost associated with the adaptation of the equipment to another line of testing equipment assuming Central accepts Tripac's offer?

Accepted Answer

A)  $72,000 
B)  $88,000 
C)  $63,000 
D)  $240,000 
E)  none of the above 
A)  $72,000 
B)  $88,000 
C)  $63,000 
D)  $240,000 
E)  none of the above

Question 17

A cafe specializes in short order meals and morning and afternoon snack breaks. It is open from 9:00 am until 4:00 pm. An office manager in a nearby high rise office building offers the owner a contract to provide her 50 employees with afternoon snack breaks for$2.00 each. Each employee would receive a drink and a snack item. The shop has an hourly capacity of 50 customers. The owner estimates that the variable costs of the afternoon breaks would be $1.20 each. Currently the afternoon service, starting at 2:00, is running at only 50 percent capacity, although the morning and noon activities are near capacity. At the present level of operations each meal/snack served is allocated a fixed cost of $0.25.
Required:
a. What nonfinancial factors should be considered by the owner?
b. Given your concerns listed in part a., should the offer be accepted? Why or why not?

Accepted Answer

a.
Nonfinancial factors to consider in e

Question 18

For short-term pricing decisions, what costs are relevant when there is available surplus capacity? When there is no available surplus capacity?

Accepted Answer

For both situations the relevant costs a

Question 19

If a manufacturer chooses to continue purchasing direct materials from a supplier because of the on-going relationship that has developed over the years, the decision is based on qualitative factors.

Accepted Answer

A) True 
 B)False

Question 20

Answer the following question(s) using the information below.
Welch 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. Welch Manufacturing has excess capacity. The following per unit data apply for sales to regular customers:
  
-For Welch Manufacturing, what is the minimum acceptable price of this special order?

Accepted Answer

A)  $110 
B)  $140 
C)  $170 
D)  $240 
E)  $255 
A)  $110 
B)  $140 
C)  $170 
D)  $240 
E)  $255

Ted owns a small body shop. His major costs include labour, parts, and rent. In the decision making process, these costs are always considered to be

The variation in total costs between two alternatives is known as

Divisional revenues which remain at the same level from year to year are known as relevant revenues.

Which of the following costs are never relevant in the decision-making process?

Managers tend to favour decision choices that make their current performance look better.

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?

A computer system installed last year is an example of a(n)

Decisions on product mix involving multiple products, should be based on which of the following?

In linear programming a mathematical inequality or equality that must be appeased is known as

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

The financial measures used to evaluate a manager's performance must be the same as those used to measure the performance of his/her department.

What is the opportunity cost associated with the adaptation of the equipment to another line of testing equipment assuming Central accepts Tripac's offer?

For short-term pricing decisions, what costs are relevant when there is available surplus capacity? When there is no available surplus capacity?

If a manufacturer chooses to continue purchasing direct materials from a supplier because of the on-going relationship that has developed over the years, the decision is based on qualitative factors.

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

Quantitative Analyses of Cost Functions

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

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 11: Decision Making and Relevant Information

Ted owns a small body shop. His major costs include labour, parts, and rent. In the decision making process, these costs are always considered to be

The variation in total costs between two alternatives is known as

Divisional revenues which remain at the same level from year to year are known as relevant revenues.

Which of the following costs are never relevant in the decision-making process?

Managers tend to favour decision choices that make their current performance look better.

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?

A computer system installed last year is an example of a(n)

Decisions on product mix involving multiple products, should be based on which of the following?

In linear programming a mathematical inequality or equality that must be appeased is known as

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

The financial measures used to evaluate a manager's performance must be the same as those used to measure the performance of his/her department.

What is the opportunity cost associated with the adaptation of the equipment to another line of testing equipment assuming Central accepts Tripac's offer?

For short-term pricing decisions, what costs are relevant when there is available surplus capacity? When there is no available surplus capacity?

If a manufacturer chooses to continue purchasing direct materials from a supplier because of the on-going relationship that has developed over the years, the decision is based on qualitative factors.

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

Quantitative Analyses of Cost Functions

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

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters