Question 1

Every decision deals with selecting a course of action based on its expected ________ results.

Accepted Answer

A) future 
B) past 
C) sunk 
D) qualitative 
A) future 
B) past 
C) sunk 
D) qualitative

Question 2

For make-or-buy decisions,a supplier's ability to deliver the item on a timely basis is considered a(n):

Accepted Answer

A) relevant cost. 
B) opportunity cost. 
C) qualitative factor. 
D) differential factor. 
A) relevant cost. 
B) opportunity cost. 
C) qualitative factor. 
D) differential factor.

Question 3

Relevant costs of a bidding decision should exclude revenues lost on lower-priced sales to existing customers.

Accepted Answer

A) True 
 B)False

Question 4

Assume you are a student and are committed to earning an undergraduate degree.Your current decision is whether to finish university 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 that

Question 5

Manawatu Furniture Ltd is approached by Ms Jenny Zhang,a new customer,to fulfil a large one-time-only special order for cabinets similar to one offered to regular customers.The following per unit data apply for sales to regular customers:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 150 \
\text { Direct labour } & 125 \
\text { Variable manufacturing support } & 80 \
\text { Fixed manufacturing support } &  \underline{75 }\
\quad \text { Total manufacturing costs } & 430 \
\text { Mark-up (60\%) } & 258 \
\text { Targeted selling price } & \underline{ \$ 688 }\
\end{array}$$ 
Manawatu Furniture Ltd has excess capacity.Ms Zhang wants the cabinets in cherry rather than oak,so direct material costs will increase by $50 per unit.
Required:
a.For Manawatu Furniture Ltd,what is the minimum acceptable price of this one-time-only special order?
b.Other than price,what other items should Manawatu Furniture Ltd consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.$415 = Variable costs ($150 + $125 + $

Question 6

The difference between the original cost of an asset and the accumulated depreciation is known as the:

Accepted Answer

A) historical cost. 
B) depreciable cost. 
C) market value. 
D) book value. 
A) historical cost. 
B) depreciable cost. 
C) market value. 
D) book value.

Question 7

In product-mix decisions:

Accepted Answer

A) never focus on the short-term,but include only long-term considerations. 
B) always focus on maximising total contribution margin. 
C) focus on the product with the greatest contribution margin per machine-hour. 
D) focus on the full costs of the product. 
A) never focus on the short-term,but include only long-term considerations. 
B) always focus on maximising total contribution margin. 
C) focus on the product with the greatest contribution margin per machine-hour. 
D) focus on the full costs of the product.

Question 8

Norton's Mufflers manufactures three different product lines,Model X,Model Y and Model Z.Considerable market demand exists for all models.The following per unit data apply:
 $$\begin{array} { l r r r r } 
& \text { Model X } & \text { Model Y } & \text { Model Z } \
 & \$ 80 & \$ 90 & \$ 100 \
\text { Direct materials } & 30 & 30 & 30 \
\text { Direct labour } ( \$ 10 \text { per hour } ) & 15 & 15 & 20 \
\text { Variable support costs } ( \$ 5 \text { per machine-hour } ) & 5 & 10 & 10 \
\text { Fixed support costs } & 20 & 20 & 20
\end{array}$$ 
a.For each model,compute the contribution margin per unit.
b.For each model,compute the contribution margin per machine-hour.
c.If there is excess capacity,which model is the most profitable to produce? Why?
d.If there is a machine breakdown,which model is the most profitable to produce? Why?
e.How can Norton encourage her sales people to promote the more profitable model?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.The contribution margin per unit is:
$

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Answer the following questions using the information below:
Frederick Company is considering replacing a machine.The following data are available:
 $\begin{array}{lrr}
&& \text { Replacement } \
&\text { Old Machine } & \text { Machine }\
\text { Original cost } & \$ 45000 & \$ 35000 \
\text { Useful life in years } & 10 & 5 \
\text { Current age in years } & 5 & 0 \
\text { Book value } & \$ 25000 & - \
\text { Disposal value now } & \$ 6000 & - \
\text { Disposal value in 5 years } & 0 & 0 \
\text { Annual cash operating costs } & \$ 6500 & \$ 4000
\end{array}$
-For the decision to keep the old machine,the relevant costs of keeping the old machine total:

Accepted Answer

A) $72 000 
B) $32 500 
C) $47 000 
D) $60 000 
A) $72 000 
B) $32 500 
C) $47 000 
D) $60 000

Question 11

Wollongong Company has a current production level of 20 000 units per month.Unit costs at this level are:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 0.25 \
\text { Direct labour } & 0.40 \
\text { Variable overhead } & 0.15 \
\text { Fixed overhead } & 0.20 \
\text { Marketing - fixed } & 0.20 \
\text { Marketing/distribution - variable } & 0.40
\end{array}$$
Current monthly sales are 18 000 units.Jim Company has contacted Wollongong Company about purchasing 1500 units at $2.00 each.Current sales would not be affected by the one-time-only special order and variable marketing/distribution costs would not be incurred on the special order.What is Wollongong Company's change in operating profits if the special order is accepted?

Accepted Answer

A) $400 increase in operating profits 
B) $1800 decrease in operating profits 
C) $1800 increase in operating profits 
D) $400 decrease in operating profits 
A) $400 increase in operating profits 
B) $1800 decrease in operating profits 
C) $1800 increase in operating profits 
D) $400 decrease in operating profits

Every decision deals with selecting a course of action based on its expected ________ results.

For make-or-buy decisions,a supplier's ability to deliver the item on a timely basis is considered a(n):

Relevant costs of a bidding decision should exclude revenues lost on lower-priced sales to existing customers.

The difference between the original cost of an asset and the accumulated depreciation is known as the:

In product-mix decisions:

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

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

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Exam 10: Decision Making and Relevant Information

Every decision deals with selecting a course of action based on its expected ________ results.

For make-or-buy decisions,a supplier's ability to deliver the item on a timely basis is considered a(n):

Relevant costs of a bidding decision should exclude revenues lost on lower-priced sales to existing customers.

The difference between the original cost of an asset and the accumulated depreciation is known as the:

In product-mix decisions:

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

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