Answer the following questions using the information below: Welch Manufacturing is approached by a European customer to fulfil 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: \[\begin{array} { l r } \text { Variable costs: } & \\ \quad \text { Direct materials } & \$ 40 \\ \quad \text { Direct labour } & 20 \\ \text { Manufacturing support } & 35 \\ \quad \text { Marketing costs } & 15 \\ \text { Fixed costs: } & \\ \quad \text { Manufacturing support } & 45 \\ \quad \text { Marketing costs } & 15 \\ \text { Total costs } & 170 \\ \text { Mark-up (50\%) } & \underline { 85 } \\ \text { Targeted selling price } & \$ 255 \end{array}\] -For Welch Manufacturing,what is the minimum acceptable price of this special order?

A) $110 B) $145 C) $255 D) $170 A) $110 B) $145 C) $255 D) $170

Exam 10: Decision Making and Relevant Information

Black Tool Company has a production capacity of 1500 units per month,but current production is only 1250 units.The manufacturing costs are $70 per unit and marketing costs are $10 per unit.Doug Hall offers to purchase 250 units at $80 each for the next five months.Should Black accept the one-time-only special order if only absorption-costing data are available?

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

D

Which of the following is a factor in deciding whether to outsource a part?

Free

(Multiple Choice)

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Question 2

Correct Answer:

Verified

D

Explain what revenues and costs are relevant when choosing among alternatives. _ _

Free

(Essay)

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Question 3

Correct Answer:

Verified

Future amounts that differ among alternatives are considered relevant.Amounts that remain the same among alternatives do not add useful information for selecting an alternative,and therefore,are not considered relevant for decision making.

Deciding to use a resource in a particular way causes a manager to forgo the opportunity to use the resource in optional ways.

(True/False)

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Question 4

Depreciation allocated to a product line is a relevant cost when deciding to discontinue that product.

(True/False)

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Question 5

The short-run TOC emphasis on maximising throughput contribution by managing bottlenecks complements the long-run strategic-cost-management focus of ABC.

(True/False)

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Question 6

Answer the following questions using the information below: Welch Manufacturing is approached by a European customer to fulfil 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: Variable costs: Direct materials \ 40 Direct labour 20 Manufacturing support 35 Marketing costs 15 Fixed costs: Manufacturing support 45 Marketing costs 15 Total costs 170 Mark-up (50\%) Targeted selling price \ 255 -For Welch Manufacturing,what is the minimum acceptable price of this special order?

(Multiple Choice)

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Question 7

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

(Multiple Choice)

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Question 8

Why is the book value of old equipment irrelevant to the equipment replacement decision? _ _

(Essay)

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Question 9

The opportunity cost of holding inventory is the income forgone by tying up money in inventory and not investing it elsewhere.

(True/False)

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Question 10

When using the five-step decision process,which one of the following steps should be done last?

(Multiple Choice)

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Question 11

Ruggles Circuit Company manufactures circuit boards for other firms.Management is attempting to search for ways to reduce manufacturing labour 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? Currently Proposed Required machine operators 5 4.5 Materials-handling workers 1.25 1.25 Employee average pay \ 8 per hour \ 9 per hour Hours worked per employee 2000 2000

(Multiple Choice)

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Question 12

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

(Essay)

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Question 13

A restaurant is deciding whether it wants to update its image or not.It currently has a cozy appeal with an outdated décor that is still in good condition,menus and carpet that need to be replaced anyway,and loyal customers. Identify for the restaurant management: a.those costs that are relevant to this decision b.those costs that are not differential c.and qualitative considerations. _ _

(Essay)

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Question 14

Past costs are also called 'sunk costs' because they are ________ and cannot be changed no matter what action is taken.

(Multiple Choice)

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Question 15

________ factors are outcomes that are difficult to measure accurately in numerical terms.

(Multiple Choice)

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Question 16

TOC emphasises management of bottleneck operations as the key to improving performance of production operations as a whole.

(True/False)

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Question 17

A recent college graduate has the choice of buying a new car for $30 000 or investing the money for four years with a 5% expected annual rate of return.If the graduate decides to purchase the car,the BEST estimate of the opportunity cost of that decision is:

(Multiple Choice)

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Question 18

TOC emphasises management of _________ operations as the key to improving performance of production operations as a whole.

(Multiple Choice)

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Question 19

In a make-or-buy decision when there are alternative uses for capacity,the opportunity cost of idle capacity is relevant.

(True/False)

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Question 20

Which of the following is a factor in deciding whether to outsource a part?

Explain what revenues and costs are relevant when choosing among alternatives. _ _

Deciding to use a resource in a particular way causes a manager to forgo the opportunity to use the resource in optional ways.

Depreciation allocated to a product line is a relevant cost when deciding to discontinue that product.

The short-run TOC emphasis on maximising throughput contribution by managing bottlenecks complements the long-run strategic-cost-management focus of ABC.

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

Why is the book value of old equipment irrelevant to the equipment replacement decision? _ _

The opportunity cost of holding inventory is the income forgone by tying up money in inventory and not investing it elsewhere.

When using the five-step decision process,which one of the following steps should be done last?

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

Past costs are also called 'sunk costs' because they are ________ and cannot be changed no matter what action is taken.

________ factors are outcomes that are difficult to measure accurately in numerical terms.

TOC emphasises management of bottleneck operations as the key to improving performance of production operations as a whole.

A recent college graduate has the choice of buying a new car for $30 000 or investing the money for four years with a 5% expected annual rate of return.If the graduate decides to purchase the car,the BEST estimate of the opportunity cost of that decision is:

TOC emphasises management of _________ operations as the key to improving performance of production operations as a whole.

In a make-or-buy decision when there are alternative uses for capacity,the opportunity cost of idle capacity is relevant.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Exam 10: Decision Making and Relevant Information

Which of the following is a factor in deciding whether to outsource a part?

Explain what revenues and costs are relevant when choosing among alternatives. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Deciding to use a resource in a particular way causes a manager to forgo the opportunity to use the resource in optional ways.

Depreciation allocated to a product line is a relevant cost when deciding to discontinue that product.

The short-run TOC emphasis on maximising throughput contribution by managing bottlenecks complements the long-run strategic-cost-management focus of ABC.

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

Why is the book value of old equipment irrelevant to the equipment replacement decision? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The opportunity cost of holding inventory is the income forgone by tying up money in inventory and not investing it elsewhere.

When using the five-step decision process,which one of the following steps should be done last?

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

Past costs are also called 'sunk costs' because they are ________ and cannot be changed no matter what action is taken.

________ factors are outcomes that are difficult to measure accurately in numerical terms.

TOC emphasises management of bottleneck operations as the key to improving performance of production operations as a whole.

A recent college graduate has the choice of buying a new car for $30 000 or investing the money for four years with a 5% expected annual rate of return.If the graduate decides to purchase the car,the BEST estimate of the opportunity cost of that decision is:

TOC emphasises management of _________ operations as the key to improving performance of production operations as a whole.

In a make-or-buy decision when there are alternative uses for capacity,the opportunity cost of idle capacity is relevant.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Explain what revenues and costs are relevant when choosing among alternatives. _ _

Why is the book value of old equipment irrelevant to the equipment replacement decision? _ _

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