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: \[\begin{array} { l r } \text { Variable costs: } & \\ \quad \text { Direct materials } & \$ 40 \\ \quad \text { Direct labour } & 20 \\ \text { Manufacturing support } & 35 \\ \quad \text { Marketing costs } & 15 \\ \text { Fixed costs: } & \\ \quad \text { Manufacturing support } & 45 \\ \quad \text { Marketing costs } & 15 \\ \text { Total costs } & 170 \\ \text { Mark-up (50\%) } & \underline { 85 } \\ \text { Targeted selling price } & \$ 255 \end{array}\] -What is the full cost of the product per unit?

A) $255 B) $170 C) $110 D) $85 A) $255 B) $170 C) $110 D) $85

Answer the following questions using the information below: Casper's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1000 units are as follows: \[\begin{array} { l r } \text { Direct materials } & \$ 40000 \\ \text { Direct labour } & 10000 \\ \text { Variable overhead costs } & 30000 \\ \text { Fixed overhead costs } & \underline{ 20000 }\\ \quad \text { Total costs } & \underline{ \$ 100000} \\ \end{array}\] 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.Casper's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. -If Casper's Engine Company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred)total:

A) $82 000 B) $100 000 C) $98 000 D) $50 000 A) $82 000 B) $100 000 C) $98 000 D) $50 000

The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year: \[\begin{array} { l r r r r } & \text { Chocolate } & \text { Chocolate Lite } & \text { Fudge } & \text { Total } \\ \text { Sales } & \$ 40000 & \$ 25000 & \$ 35000 & \$ 100000 \\ \text { Cost of goods sold } & 26000 & \underline { 15000 } & \underline { 19000 } & \underline { 60000 } \\ \text { Contribution margin } & 14000 & 10000 & 16000 & 40000 \\ \text { Delivery and ordering costs } & 2000 & 3000 & 2000 & 7000 \\ \text { Rent (per sq. metre used) } & 3000 & 3000 & 2000 & 8000 \\ \text { Allocated corporate costs } & 5000 & 5000 & 5000 & 15000 \\ \text { Corporate profit } & \$ 4000 & \$ 1000 ) & \$ 7000 & \$ 10000 \end{array}\] a.Do you recommend discontinuing the Chocolate-Lite product line? Why or why not? b.If the Chocolate product line had been discontinued,corporate profits for the current year would have decreased by what amount?

a.No,I would not recommend discontinuing

Cochran Corporation has a plant capacity of 100 000 units per month.Unit costs at capacity are: \[\begin{array} { l r } \text { Direct materials } & \$ 4.00 \\ \text { Direct labour } & 6.00 \\ \text { Variable overhead } & 3.00 \\ \text { Fixed overhead } & 1.00 \\ \text { Marketing-fixed } & 7.00 \\ \text { Marketing/distribution-variable } & 3.60 \end{array}\] Current monthly sales are 95 000 units at $30.00 each.Suzie Inc. ,has contacted Cochran Corporation about purchasing 3000 units at $20.00 each.Current sales would not be affected by the one-time-only special order.What is Cochran's change in operating profits if the one-time-only special order is accepted?

A) $10 200 increase B) $17 200 increase C) $33 200 increase D) $22 000 increase A) $10 200 increase B) $17 200 increase C) $33 200 increase D) $22 000 increase

Answer the following questions using the information below: White's Brakes 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: \[\begin{array} { l r r r r } & \text { Model X } & \text { Model Y } & \text { Model Z } \\ \text { Selling price } & \$ 50 & \$ 60 & \$ 70 \\ \text { Direct materials } & 6 & 6 & 6 \\ \text { Direct labour ( } \$ 12 \text { per hour) } & 12 & 12 & 24 \\ \text { Variable support costs } ( \$ 4 \text { per machine-hour) } & 4 & 8 & 8 \\ \text { Fixed support costs } & 10 & 10 & 10 \end{array}\] -If there is a machine breakdown,which model is the most profitable to produce?

A) Model X B) Model Y C) Model Z D) Models Y and Z A) Model X B) Model Y C) Model Z D) Models Y and Z

Answer the following questions using the information below: Frank's Furniture Company manufactures three sizes of lounge chairs: small,medium and large.Product information is provided below. $\begin{array}{lrrr} &\text { Small}&\text { Medium }&\text { Large }\\ \text { Urit selling price } & \$ 150 & \$ 250 & \$ 500 \\ \text { Unit costs: } & & & \\ \quad \text { Variable manufacturing } & (60) & (120) & (200) \\ \quad \text { Fixed manufacturing } & (40) & (50) & (120) \\ \quad \text { Variable ælling and administrative } & \underline{30)} & \underline{30)} & \underline{30)} \\ \text { Unit profit } & \underline{\$ 20} & \underline{\$ 50} & \underline{\$ 150} \\ & & & \\ \text { Demand in units } & 100 & 120 & 100 \\ \text { Machine-hours per unit } & 20 & 40 & 100 \end{array}$ The maximum machine-hours available are 6000 per week. -What is the contribution margin per machine-hour for a large chair?

A) $1.80 B) $5.00 C) $2.70 D) $3.00 A) $1.80 B) $5.00 C) $2.70 D) $3.00

A) have future implications. B) are differential. C) are relevant. D) are ignored when evaluating alternatives. A) have future implications. B) are differential. C) are relevant. D) are ignored when evaluating alternatives.

Exam 10: Decision Making and Relevant Information

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 -What is the full cost of the product per unit?

(Multiple Choice)

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Question 61

Outsourcing is without risks.

(True/False)

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Question 62

Just because qualitative factors and quantitative non-financial factors cannot be measured easily in financial terms does not make them:

(Multiple Choice)

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Question 63

Managers tend to favour the alternative that makes their performance look best.Therefore,they tend to focus on:

(Multiple Choice)

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Question 64

Answer the following questions using the information below: Casper's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1000 units are as follows: Direct materials \ 40000 Direct labour 10000 Variable overhead costs 30000 Fixed overhead costs Total costs 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.Casper's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. -If Casper's Engine Company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred)total:

(Multiple Choice)

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Question 65

When a firm has constrained capacity as opposed to surplus capacity,opportunity costs will be:

(Multiple Choice)

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Question 66

The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year: Chocolate Chocolate Lite Fudge Total Sales \ 40000 \ 25000 \ 35000 \ 100000 Cost of goods sold 26000 Contribution margin 14000 10000 16000 40000 Delivery and ordering costs 2000 3000 2000 7000 Rent (per sq. metre used) 3000 3000 2000 8000 Allocated corporate costs 5000 5000 5000 15000 Corporate profit \ 4000 \ 1000) \ 7000 \ 10000 a.Do you recommend discontinuing the Chocolate-Lite product line? Why or why not? b.If the Chocolate product line had been discontinued,corporate profits for the current year would have decreased by what amount?

(Essay)

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Question 67

For decision making,a listing of the relevant costs:

(Multiple Choice)

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Question 68

Cochran Corporation has a plant capacity of 100 000 units per month.Unit costs at capacity are: Direct materials \ 4.00 Direct labour 6.00 Variable overhead 3.00 Fixed overhead 1.00 Marketing-fixed 7.00 Marketing/distribution-variable 3.60 Current monthly sales are 95 000 units at $30.00 each.Suzie Inc. ,has contacted Cochran Corporation about purchasing 3000 units at $20.00 each.Current sales would not be affected by the one-time-only special order.What is Cochran's change in operating profits if the one-time-only special order is accepted?

(Multiple Choice)

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Question 69

The theory of constraints describes methods to maximise operating profit when faced with some bottleneck and some non-bottleneck operations.

(True/False)

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Question 70

An important factor in ________ decisions is the manager's perception of whether the decision model is consistent with how the manager's performance will be judged after the decision is implemented.

(Multiple Choice)

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Question 71

Resolving the conflict between the ________ model and the performance-evaluation model is frequently a baffling problem in practice.

(Multiple Choice)

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Question 72

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

(True/False)

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Question 73

Good managers use a five-step guide to making decisions.

(True/False)

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Question 74

Answer the following questions using the information below: White's Brakes 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: Model X Model Y Model Z Selling price \ 50 \ 60 \ 70 Direct materials 6 6 6 Direct labour ( \ 12 per hour) 12 12 24 Variable support costs (\ 4 per machine-hour) 4 8 8 Fixed support costs 10 10 10 -If there is a machine breakdown,which model is the most profitable to produce?

(Multiple Choice)

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Question 75

The sum of all costs (variable and fixed)in a particular business function of the value chain,such as manufacturing costs or marketing costs,are called 'business function costs'.

(True/False)

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Question 76

Opportunity costs are not incorporated into formal financial accounting records.

(True/False)

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Question 77

Answer the following questions using the information below: Frank's Furniture Company manufactures three sizes of lounge chairs: small,medium and large.Product information is provided below. Small Medium Large Urit selling price \ 150 \ 250 \ 500 Unit costs: Variable manufacturing (60) (120) (200) Fixed manufacturing (40) (50) (120) Variable ælling and administrative Unit profit Demand in units 100 120 100 Machine-hours per unit 20 40 100 The maximum machine-hours available are 6000 per week. -What is the contribution margin per machine-hour for a large chair?

(Multiple Choice)

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Question 78

Sunk costs:

(Multiple Choice)

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Question 79

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

(Multiple Choice)

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Question 80

Outsourcing is without risks.

Just because qualitative factors and quantitative non-financial factors cannot be measured easily in financial terms does not make them:

Managers tend to favour the alternative that makes their performance look best.Therefore,they tend to focus on:

When a firm has constrained capacity as opposed to surplus capacity,opportunity costs will be:

For decision making,a listing of the relevant costs:

The theory of constraints describes methods to maximise operating profit when faced with some bottleneck and some non-bottleneck operations.

An important factor in ________ decisions is the manager's perception of whether the decision model is consistent with how the manager's performance will be judged after the decision is implemented.

Resolving the conflict between the ________ model and the performance-evaluation model is frequently a baffling problem in practice.

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

Good managers use a five-step guide to making decisions.

The sum of all costs (variable and fixed)in a particular business function of the value chain,such as manufacturing costs or marketing costs,are called 'business function costs'.

Opportunity costs are not incorporated into formal financial accounting records.

Sunk costs:

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

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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