Question 1

What could feedback regarding previous actions affect?

Accepted Answer

A) The decision model 
B) Implementation of the decision 
C) Future predictions 
D) All of these answers are correct 
A) The decision model 
B) Implementation of the decision 
C) Future predictions 
D) All of these answers are correct

Question 2

Focusing on the relevant data is especially helpful when all the information needed to prepare a detailed ________ is unavailable.

Accepted Answer

A) income statement 
B) cost sheet 
C) balance sheet 
D) analysis 
A) income statement 
B) cost sheet 
C) balance sheet 
D) analysis

Question 3

The three steps involved in linear programming include all of the following EXCEPT:

Accepted Answer

A) determining the objective. 
B) determining the relevant and irrelevant costs. 
C) computing the optimal solution. 
D) determining the basic relationship. 
A) determining the objective. 
B) determining the relevant and irrelevant costs. 
C) computing the optimal solution. 
D) determining the basic relationship.

Question 4

Relevant-cost analysis generally emphasises ________ factors that can be expressed in financial terms.

Accepted Answer

A) qualitative 
B) strategic 
C) operational 
D) quantitative 
A) qualitative 
B) strategic 
C) operational 
D) quantitative

Question 5

Le Giro 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 $75 and $25,respectively.Normal production is 200 000 wheels per year.
A supplier offers to make the wheels at a price of $108 each.If the bicycle company accepts this offer,all variable manufacturing costs will be eliminated,but the $420 000 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 Le Giro Bicycles buy the wheels from the outside supplier? Justify your answer.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

\[\begin{array} { l c c } 
\text { a. }

Question 6

Bikelites Company is considering eliminating Model AE1 from its rear lights line because of losses over the past quarter.The past three months of information for model AE1 is summarised below:
 $$\begin{array} { l r } 
\text { Sales (2000 units) } & \$ 500000 \
\text { Manufacturing costs: } & \
\quad \text { Direct materials } & 280000 \
\text { Direct labour ( } \$ 15 \text { per hour) } & 60000 \
\text { Support } & 200000 \
\text { Operating loss } & ( \$ 40000 )
\end{array}$$ 
Support costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE1 that has no resale value.
Should Bikelites Company eliminate Model AE1 from its product line? Why or why not?

Accepted Answer

No,Bikelites Company should no

Question 7

Which of the following minimise the risks of outsourcing?

Accepted Answer

A) Building close relationships with the supplier 
B) The responsibility for on-time delivery is now the responsibility of the supplier 
C) The use of short-term contracts that specify price 
D) All of these answers are correct. 
A) Building close relationships with the supplier 
B) The responsibility for on-time delivery is now the responsibility of the supplier 
C) The use of short-term contracts that specify price 
D) All of these answers are correct.

Question 8

What occurs in an operation when the work to be performed exceeds the available capacity to do it?

Accepted Answer

A) Opportunity 
B) Bottleneck 
C) Sunk cost 
D) Qualitative factor 
A) Opportunity 
B) Bottleneck 
C) Sunk cost 
D) Qualitative factor

Question 9

When there is excess capacity,it makes sense to accept a one-time-only special order for less than the current selling price when:

Accepted Answer

A) it never makes sense. 
B) the company placing the order is in the same market segment as your current customers. 
C) incremental revenues exceed incremental costs. 
D) additional fixed costs must be incurred to accommodate the order. 
A) it never makes sense. 
B) the company placing the order is in the same market segment as your current customers. 
C) incremental revenues exceed incremental costs. 
D) additional fixed costs must be incurred to accommodate the order.

Question 10

Full costs of a product include variable costs,but not fixed costs.

Accepted Answer

A) True 
 B)False

Question 11

All variable costs are relevant and all fixed costs are irrelevant.

Accepted Answer

A) True 
 B)False

Question 12

Answer the following questions using the information below:
Flowers For Everyone is considering replacing its existing delivery van with a new one.The new van can offer considerable savings in operating costs.Information about the existing van and the new van follow:
 $$\begin{array} { l r r } 
& \text { Existing van } & \text { New van } \
\text { Original cost } & \$ 100000 & \$ 180000 \
\text { Antual operating cost } & \$ 33000 & \$ 20000 \
\text { Accumulated depreciation } & \$ 60000 & - \
\text { Current salvage value of the existing van } & \$ 45000 & - \
\text { Remaining life } & 10 \text { years } & 10 \text { years } \
\text { Salvage value in 10 years } & \$ 0 & \$ 0 \
\text { Antual depreciation } & \$ 4000 & \$ 18000
\end{array}$$
-'Sunk costs' include:

Accepted Answer

A) the original cost of the existing van. 
B) the annual operating cost of the new van. 
C) the original cost of the new van. 
D) the current salvage value of the existing van. 
A) the original cost of the existing van. 
B) the annual operating cost of the new van. 
C) the original cost of the new van. 
D) the current salvage value of the existing van.

Question 13

If the $20 000 spent to purchase inventory could be invested and earn interest of $1200,then the opportunity cost of holding inventory is $20 000.

Accepted Answer

A) True 
 B)False

Question 14

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 excess capacity,which model is the most profitable to produce?

Accepted Answer

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

Question 15

Which of the following do relevant costs exclude when deciding whether to discontinue a segment of a business?

Accepted Answer

A) Variable marketing costs per unit of product sold 
B) Cost of goods sold 
C) Future administrative costs that will continue 
D) Fixed supervision costs that can be eliminated 
A) Variable marketing costs per unit of product sold 
B) Cost of goods sold 
C) Future administrative costs that will continue 
D) Fixed supervision costs that can be eliminated

Question 16

When deciding whether to discontinue a segment of a business,managers should focus on:

Accepted Answer

A) equipment used by that segment that could become idle. 
B) how total costs differ among alternatives. 
C) operating profit per unit of the discontinued segment. 
D) reallocation of corporate costs. 
A) equipment used by that segment that could become idle. 
B) how total costs differ among alternatives. 
C) operating profit per unit of the discontinued segment. 
D) reallocation of corporate costs.

Question 17

Which of the following focuses on responsibility centres for a specific period,not on projects or individual items of equipment over their useful lives?

Accepted Answer

A) Performance evaluation 
B) Relevant costing 
C) Quantitative analysis 
D) Qualitative analysis 
A) Performance evaluation 
B) Relevant costing 
C) Quantitative analysis 
D) Qualitative analysis

Question 18

Kirkland Company manufactures a part for use in its production of hats.When 10 000 items are produced,the costs per unit are:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 0.60 \
\text { Direct manufacturing labour } & 3.00 \
\text { Variable manufacturing overhead } & 1.20 \
\text { Fixed manufacturing overhead } & \underline { 1.60 } \
\quad \text { Total } &  \underline{\$ 6.40} \
\end{array}$$ 
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 $9000 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

a.
  The b

Question 19

Favata Corporation manufactures two products,AA and CC.The following information was available:
$$\begin{array} { l c r } 
& \text { AA } & \text { CC } \
\text { Selling price per unit } & \$ 37 & \$ 26 \
\text { Variable cost per unit } & 34 & 21 \
& & \
\text { Total fixed costs } & \$ 18000
\end{array}$$
If Favata Corporation could produce and sell either 10 000 units of AA or 5000 units of CC at full capacity,it should produce and sell:

Accepted Answer

A) 10 000 units of AA and none of CC 
B) 5000 units of CC and none of AA 
C) 3000 units of CC and 6000 units of AA 
D) 4000 units of AA and 5000 units of CC 
A) 10 000 units of AA and none of CC 
B) 5000 units of CC and none of AA 
C) 3000 units of CC and 6000 units of AA 
D) 4000 units of AA and 5000 units of CC

Question 20

Which of the following does a decision model involve?

Accepted Answer

A) Both quantitative and qualitative analyses 
B) Only quantitative analyses 
C) A manager's instinct 
D) Only qualitative analyses 
A) Both quantitative and qualitative analyses 
B) Only quantitative analyses 
C) A manager's instinct 
D) Only qualitative analyses

What could feedback regarding previous actions affect?

Focusing on the relevant data is especially helpful when all the information needed to prepare a detailed ________ is unavailable.

The three steps involved in linear programming include all of the following EXCEPT:

Relevant-cost analysis generally emphasises ________ factors that can be expressed in financial terms.

Which of the following minimise the risks of outsourcing?

What occurs in an operation when the work to be performed exceeds the available capacity to do it?

When there is excess capacity,it makes sense to accept a one-time-only special order for less than the current selling price when:

Full costs of a product include variable costs,but not fixed costs.

All variable costs are relevant and all fixed costs are irrelevant.

If the $20 000 spent to purchase inventory could be invested and earn interest of $1200,then the opportunity cost of holding inventory is $20 000.

Which of the following do relevant costs exclude when deciding whether to discontinue a segment of a business?

When deciding whether to discontinue a segment of a business,managers should focus on:

Which of the following focuses on responsibility centres for a specific period,not on projects or individual items of equipment over their useful lives?

Which of the following does a decision model involve?

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

What could feedback regarding previous actions affect?

Focusing on the relevant data is especially helpful when all the information needed to prepare a detailed ________ is unavailable.

The three steps involved in linear programming include all of the following EXCEPT:

Relevant-cost analysis generally emphasises ________ factors that can be expressed in financial terms.

Which of the following minimise the risks of outsourcing?

What occurs in an operation when the work to be performed exceeds the available capacity to do it?

When there is excess capacity,it makes sense to accept a one-time-only special order for less than the current selling price when:

Full costs of a product include variable costs,but not fixed costs.

All variable costs are relevant and all fixed costs are irrelevant.

If the $20 000 spent to purchase inventory could be invested and earn interest of $1200,then the opportunity cost of holding inventory is $20 000.

Which of the following do relevant costs exclude when deciding whether to discontinue a segment of a business?

When deciding whether to discontinue a segment of a business,managers should focus on:

Which of the following focuses on responsibility centres for a specific period,not on projects or individual items of equipment over their useful lives?

Which of the following does a decision model involve?

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