Question 1

If management takes a multiple-year view in the decision model and judges success according to the current year's results, a problem will occur in the

Accepted Answer

A)  decision model. 
B)  performance evaluation model. 
C)  production evaluation model. 
D)  year-end review model. 
E)  responsibility centre allocation. 
A)  decision model. 
B)  performance evaluation model. 
C)  production evaluation model. 
D)  year-end review model. 
E)  responsibility centre allocation.

Question 2

A customer can be considered to be a cost object, in the decision to add or drop a particular customer.

Accepted Answer

A) True 
 B)False

Question 3

When making decisions, it is best to use

Accepted Answer

A)  average costs. 
B)  fixed costs that would be incurred. 
C)  unit cost, rather than total cost. 
D)  variable costs that would be incurred. 
E)  relevant costs. 
A)  average costs. 
B)  fixed costs that would be incurred. 
C)  unit cost, rather than total cost. 
D)  variable costs that would be incurred. 
E)  relevant costs.

Question 4

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 5

Lobster Liquidators will make $500,000 if the fishing season weather is good, $200,000 if the weather is fair, and would actually lose $50,000 if the weather is poor during the season. If the weather service gives a 40% probability of good weather, a 25% probability of fair weather, and a 35% probability of poor weather, what is the expected value of the profit for Lobster Liquidators?

Accepted Answer

A)  $500,000 
B)  $232,500 
C)  $267,500 
D)  $200,000 
E)  $217,000 
A)  $500,000 
B)  $232,500 
C)  $267,500 
D)  $200,000 
E)  $217,000

Question 6

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:
  
-What is the contribution margin per unit?

Accepted Answer

A)  $85 
B)  $110 
C)  $145 
D)  $160 
E)  $195 
A)  $85 
B)  $110 
C)  $145 
D)  $160 
E)  $195

Question 7

Quiett Truck manufactures part WB23 used in several of its truck models. 10,000 units are produced each year with production costs as follows:
   Quiett Truck has the option of purchasing part WB23 from an outside supplier at $11.20 per unit. If WB23 is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.
Required:
a. Describe avoidable costs. What amount of the WB23 production costs is avoidable?
b. Should Quiett Truck outsource WB23? Why or why not?
c. What other items should Quiett Truck consider before outsourcing any of the parts it currently manufactures?

Accepted Answer

a. Avoidable costs are those costs elimi

Question 8

Answer the following question(s) using the information below.
Konrade's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
   It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Konrade's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit.
-If Konrade's Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total

Accepted Answer

A)  $80,000. 
B)  $98,000. 
C)  $50,000. 
D)  $100,000. 
E)  $82,000. 
A)  $80,000. 
B)  $98,000. 
C)  $50,000. 
D)  $100,000. 
E)  $82,000.

Question 9

Insourcing is the process of producing goods and services within the firm rather than purchasing them from an outside supplier.

Accepted Answer

A) True 
 B)False

Question 10

Sunk costs

Accepted Answer

A)  are relevant. 
B)  are differential. 
C)  have future implications. 
D)  are ignored when evaluating alternatives. 
E)  are evaluated to determine if they are relevant or not evaluating alternatives. 
A)  are relevant. 
B)  are differential. 
C)  have future implications. 
D)  are ignored when evaluating alternatives. 
E)  are evaluated to determine if they are relevant or not evaluating alternatives.

Question 11

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 12

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.
-Assuming accepting the offer creates excess facility capacity that can be used to produce 2,000 units of another product that has a unit selling price of $24, variable costs of $12, and fixed cost allocation of $3. What is the highest price that Schmidt should be willing to pay Phil Company for 10,000 units of the part?

Accepted Answer

A)  $146,000 
B)  $164,000 
C)  $116,000 
D)  $134,000 
E)  $186,000 
A)  $146,000 
B)  $164,000 
C)  $116,000 
D)  $134,000 
E)  $186,000

Question 13

Which of the following terms represents additional costs required to obtain an additional quantity, over and above existing or planned quantities of a cost object?

Accepted Answer

A)  contract increase costs 
B)  contract pocket costs 
C)  contract expense 
D)  outlay costs 
E)  super variable costs 
A)  contract increase costs 
B)  contract pocket costs 
C)  contract expense 
D)  outlay costs 
E)  super variable costs

Question 14

Under what conditions might a manufacturing firm sell a product for less than its long-term price? Why?

Accepted Answer

The price for a short-term order may be

Question 15

A local accounting firm has offered to do all the billings and collections of a general practitioner. The annual fee will be $12,000. The service will replace the part-time bookkeeper who works for $12 an hour, 10 hours a week. Because outsourcing accounting activities will take place away from the office, the doctor estimates that she will have one additional hour a week to see patients. Normally she sees four patients an hour with an average visit fee of $100. The office is open 50 weeks a year. Since the computer service will maintain all records in its office, the doctor will no longer need to rent storage space for the office files. The storage space rents for $150 a month.
Required:
Determine whether or not the doctor should accept the offer to use the computer service.

Accepted Answer

@#IMG-DLM& Opportunity costs

Question 16

Ignoring tax consequences, how should the gain or loss on disposal of an old machine be treated in an equipment replacement decision?

Accepted Answer

A)  used to defray installation costs of the new machine 
B)  deducted from the accumulated amortization 
C)  deducted from the cost of the new machine 
D)  added to the accumulated amortization (or deducted from the cost) of the old machine 
E)  It is irrelevant. 
A)  used to defray installation costs of the new machine 
B)  deducted from the accumulated amortization 
C)  deducted from the cost of the new machine 
D)  added to the accumulated amortization (or deducted from the cost) of the old machine 
E)  It is irrelevant.

Question 17

Kando Manufacturing Ltd. produces two products, lawn mowers and power washers. Lawn mowers have a unit contribution margin of $75, and power washers have a unit contribution margin of $55. The demand for lawn mowers exceeds their production capacity, which is limited by available direct labour and machine hours. The maximum demand for power washers is 300 per week. Management desires that the product mix should maximize the weekly contribution toward fixed costs and profits.
Direct manufacturing labour is limited to 600 hours a week and 400 hours is all that the company's outdated machines can run a week. The lawn mowers require 1.5 hours of labour and 1 machine hour. Power washers require 2.5 labour hours and 2 machine hours.
Required:
Formulate the linear programming objective function and constraints necessary to determine the optimal product mix.

Accepted Answer

@#IMG-DLM& Note: P≤ 300 is not necessary

Question 18

Last year, a sailboard company produced two types of boards: a regular board for multi-purpose sailing; and, a special trick board used by experts for competitions. The regular board sells for $750 and the competition board sells for $1,350. The variable production costs are $250 and $400 respectively, and the company has $400,000 in fixed costs overall. Marketing staff have determined that the company should specialize in the competition boards only, and sell the regular boards, if at all, under a different brand name. Last year the company made a profit, selling twice as many regular boards as competition boards, resulting in a fixed cost allocation of $5.00 per board. It takes 6 hours of direct labour to make a regular board and 12 hours to make a competition board. The company worked at full capacity of 19,500 direct labour hours last year. Based on the above information only, which product or mix of products, should the company choose? Assume that any and all production can be sold.

Accepted Answer

A)  the regular board only, as it takes fewer direct labour hours to build 
B)  both, as the company made a profit last year using this strategy 
C)  the competition board only, as it has a higher contribution margin 
D)  Any combination is equivalent, based on the contribution margin times the number of boards that could be sold. 
E)  the regular board only, as it has the highest contribution margin per direct labour hour 
A)  the regular board only, as it takes fewer direct labour hours to build 
B)  both, as the company made a profit last year using this strategy 
C)  the competition board only, as it has a higher contribution margin 
D)  Any combination is equivalent, based on the contribution margin times the number of boards that could be sold. 
E)  the regular board only, as it has the highest contribution margin per direct labour hour

Question 19

For one-time-only special orders, variable costs may be relevant but not fixed costs.

Accepted Answer

A) True 
 B)False

Question 20

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.
-Assuming no other use of their facilities, the highest price that Schmidt should be willing to pay for 10,000 units of the part is

Accepted Answer

A)  $210,000. 
B)  $170,000. 
C)  $110,000. 
D)  $180,000. 
E)  $140,000. 
A)  $210,000. 
B)  $170,000. 
C)  $110,000. 
D)  $180,000. 
E)  $140,000.

If management takes a multiple-year view in the decision model and judges success according to the current year's results, a problem will occur in the

A customer can be considered to be a cost object, in the decision to add or drop a particular customer.

When making decisions, it is best to use

The last step in the decision process is normally to

Insourcing is the process of producing goods and services within the firm rather than purchasing them from an outside supplier.

Sunk costs

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

Which of the following terms represents additional costs required to obtain an additional quantity, over and above existing or planned quantities of a cost object?

Under what conditions might a manufacturing firm sell a product for less than its long-term price? Why?

Ignoring tax consequences, how should the gain or loss on disposal of an old machine be treated in an equipment replacement decision?

For one-time-only special orders, variable costs may be relevant but not fixed costs.

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

If management takes a multiple-year view in the decision model and judges success according to the current year's results, a problem will occur in the

A customer can be considered to be a cost object, in the decision to add or drop a particular customer.

When making decisions, it is best to use

The last step in the decision process is normally to

Insourcing is the process of producing goods and services within the firm rather than purchasing them from an outside supplier.

Sunk costs

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

Which of the following terms represents additional costs required to obtain an additional quantity, over and above existing or planned quantities of a cost object?

Under what conditions might a manufacturing firm sell a product for less than its long-term price? Why?

Ignoring tax consequences, how should the gain or loss on disposal of an old machine be treated in an equipment replacement decision?

For one-time-only special orders, variable costs may be relevant but not fixed costs.

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