Question 1

Outsourcing is purchasing goods and services from outside vendors.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a relevant cost to be included in a make-or-buy decision?

Accepted Answer

A)  fixed salaries that will not be incurred if the part is outsourced 
B)  pension costs to the current employees 
C)  increase in the price of all equipment of the firm 
D)  material-handling costs that cannot be eliminated 
A)  fixed salaries that will not be incurred if the part is outsourced 
B)  pension costs to the current employees 
C)  increase in the price of all equipment of the firm 
D)  material-handling costs that cannot be eliminated

Question 3

Based on the theory of constraints,investments equal ________.

Accepted Answer

A)  the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and business function costs 
B)  the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings 
C)  the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and full costs 
D)  the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; sunk costs, full costs, and business function costs 
A)  the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and business function costs 
B)  the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings 
C)  the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and full costs 
D)  the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; sunk costs, full costs, and business function costs

Question 4

Feedback regarding previous actions may affect ________.

Accepted Answer

A)  future predictions 
B)  implementation of the decision 
C)  the decision model 
D)  All of these answers are correct. 
A)  future predictions 
B)  implementation of the decision 
C)  the decision model 
D)  All of these answers are correct.

Question 5

Schmidt Sewing Company incorporates the services of Deb's Sewing.Schmidt purchases pre-cut dresses from Deb's.This is primarily known as ________.

Accepted Answer

A)  insourcing 
B)  outsourcing 
C)  fragmentation 
D)  in-housing 
A)  insourcing 
B)  outsourcing 
C)  fragmentation 
D)  in-housing

Question 6

Answer the following questions using the information below:
Contrafic Lighting manufactures small flashlights and is considering raising the price by 75 cents a unit for the coming year. With a 75-cent price increase, demand is expected to fall by 7,000 units.
 $$\begin{array} { l r r } 
& \text { Current } & \text { Projected } \
\text { Demand } & 75,000 \text { units } & 68,000 \text { units } \
\text { Selling price } & \$ 8.50 & \$ 9.25 \
\text { Incremental cost per unit } & \$ 4.80 & \$ 4.80
\end{array}$$
-Would you recommend the 75-cent price increase?

Accepted Answer

A)  No, because demand decreased. 
B)  No, because the selling price increases. 
C)  Yes, because contribution margin per unit increases. 
D)  Yes, because operating profits increase. 
A)  No, because demand decreased. 
B)  No, because the selling price increases. 
C)  Yes, because contribution margin per unit increases. 
D)  Yes, because operating profits increase.

Question 7

Which of the following minimizes the risks of outsourcing?

Accepted Answer

A)  the use of short-term contracts that specify price 
B)  shifting the firm's responsibility for on-time delivery to the supplier 
C)  building close partnerships with the supplier 
D)  increasing the contract price 
A)  the use of short-term contracts that specify price 
B)  shifting the firm's responsibility for on-time delivery to the supplier 
C)  building close partnerships with the supplier 
D)  increasing the contract price

Question 8

Which of the following is true of historical costs?

Accepted Answer

A)  They are useful for making future predictions. 
B)  They are used for decision making. 
C)  They are always accounted as opportunity costs. 
D)  They cannot be fixed costs. 
A)  They are useful for making future predictions. 
B)  They are used for decision making. 
C)  They are always accounted as opportunity costs. 
D)  They cannot be fixed costs.

Question 9

Answer the following questions using the information below:
Coroid Manufacturers Inc. is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers:
 $\begin{array}{l}
\text { Variable costs: }\
\text { Direct materials } & \$ 120 \
\text { Direct labor } & 60 \
\text { Manufacturing support } & 105 \
\text { Marketing costs } & 45\
\text { Fixed costs: }\
\text { Manufacturing support } & 135 \
\text { Marketing costs } & \underline{45}\\text { Total costs } & 510 \
\text { Markup (50\%) } & 255 \
\text { Targeted selling price } & \$ 765
\end{array}$
-What is the contribution margin per unit?

Accepted Answer

A)  $170 
B)  $220 
C)  $435 
D)  $510 
A)  $170 
B)  $220 
C)  $435 
D)  $510

Question 10

For short-run product-mix decisions,maximizing contribution margin will also result in maximizing operating income.

Accepted Answer

A) True 
 B)False

Question 11

Answer the following questions using the information below:
Dynondo'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:
 $\begin{array}{lrrr}&\text { Model X }&\text { Model Y }&\text { Model Z }\
\text { Selling price } & \$ 50 & \$ 60 & \$ 70 \
\text { Direct materials } & 6 & 6 & 6 \
\text { Direct labor ( } \$ 12 \text { per hour) } & 12 & 12 & 24 \
\text { Variable support costs ( } \$ 4 \text { per machine-hour) } & 4 & 8 & 8 \
\text { Fixed support costs } & 10 & 10 & 10
\end{array}$
-Which model has the greatest contribution margin per unit?

Accepted Answer

A)  Model X 
B)  Model Y 
C)  Model Z 
D)  Both Model X and Model Y have the highest and same contribution margin per unit 
A)  Model X 
B)  Model Y 
C)  Model Z 
D)  Both Model X and Model Y have the highest and same contribution margin per unit

Question 12

Answer the following questions using the information below:
The management accountant for Giada's Book Store has prepared the following income statement for the most current year:
 $\begin{array}{lrrrr}
&\text { Cookbook }&\text { Travel Book }&\text { Classics }&\text { Total }\
\text { Sales } & \$ 60,000 & \$ 100,000 & \$ 40,000 & \$ 200,000 \
\text { Cost of goods sold } & 36,000 & 65,000 & 20,000 & 121,000 \
\text { Contribution margin } & 24,000 & 35,000 & 20,000 & 79,000 \
\text { Order and delivery processing } & 18,000 & 21,000 & 8,000 & 47,000\
\text { Rent (per sq. foot used) } & 2,000 & 1,000 & 3,000 & 6,000 \
\text { Allocated corporate costs } & 7,000 & 7,000 & 7,000 & 21,000 \
\text { Corporate profit } & \$(3,000) & \$ 6,000 & \$ 2,000 & \$ 5,000
\end{array}$
-If the cookbook product line had been discontinued prior to this year,the company would have reported ________.

Accepted Answer

A)  greater corporate profits 
B)  the same amount of corporate profits 
C)  less corporate profits 
D)  resulting profits cannot be determined 
A)  greater corporate profits 
B)  the same amount of corporate profits 
C)  less corporate profits 
D)  resulting profits cannot be determined

Question 13

Answer the following questions using the information below:
Contrafic's Kitchens is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
 $\begin{array}{lr}
\text { Direct materials } & \$ 546 \
\text { Direct labor } & 360 \
\text { Variable manufacturing support } & 54 \
\text { Fixed manufacturing support } & 120 \
\quad \text { Total manufacturing costs } & 1,080 \
\text { Markup (60\%) } & 648 \
\text { Targeted selling price } & \$ 1,728
\end{array}$ Contrafic's Kitchens has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $60 per unit. The average marketing cost of Contrafic's Kitchens is $180 per order.
-For Contrafic's Kitchens,what is the full cost of the one-time-only special order?

Accepted Answer

A)  $1,020 
B)  $1,140 
C)  $1,080 
D)  $1,320 
A)  $1,020 
B)  $1,140 
C)  $1,080 
D)  $1,320

Question 14

Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter.The past three months of information for Model AE2 are summarized below: $\begin{array}{lr}
\text { Sales (1,000 units) } & \$ 300,000 \
\text { Manufacturing costs: } & \
\quad \text { Direct materials } & 150,000 \
\quad \text { Direct labor ( } \$ 15 \text { per hour) } & 60,000 \
\quad \text { Overhead } & 100,000 \
\text { Operating loss } & (\$ 10,000)
\end{array}$ Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value.
If Model AE2 is dropped from the product line,operating income will ________.

Accepted Answer

A)  increase by $10,000 
B)  decrease by $20,000 
C)  increase by $30,000 
D)  decrease by $10,000 
A)  increase by $10,000 
B)  decrease by $20,000 
C)  increase by $30,000 
D)  decrease by $10,000

Question 15

Factors used to decide whether to outsource a part include ________.

Accepted Answer

A)  the supplier's cost of direct materials 
B)  if the supplier is reliable 
C)  the original cost of equipment currently used for production of that part 
D)  past design costs used to develop the current composition of the part 
A)  the supplier's cost of direct materials 
B)  if the supplier is reliable 
C)  the original cost of equipment currently used for production of that part 
D)  past design costs used to develop the current composition of the part

Question 16

If Option 1 costs $120 and Option 2 costs $90,then the differential cost is $30.

Accepted Answer

A) True 
 B)False

Question 17

Discontinuing unprofitable products will ________.

Accepted Answer

A)  increase profitability if the resources no longer required by the discontinued product can be eliminated 
B)  increase profitability if capacity constraints are adjusted 
C)  decrease profitability if the fixed costs does not change after discontinuing the particular business segment 
D)  increase profitability when a large portion of the fixed costs are unavoidable 
A)  increase profitability if the resources no longer required by the discontinued product can be eliminated 
B)  increase profitability if capacity constraints are adjusted 
C)  decrease profitability if the fixed costs does not change after discontinuing the particular business segment 
D)  increase profitability when a large portion of the fixed costs are unavoidable

Question 18

In linear programming,a constraint is a mathematical inequality or equality that must be satisfied by the variables in a mathematical model.

Accepted Answer

A) True 
 B)False

Outsourcing is purchasing goods and services from outside vendors.

Which of the following is a relevant cost to be included in a make-or-buy decision?

Based on the theory of constraints,investments equal ________.

Feedback regarding previous actions may affect ________.

Schmidt Sewing Company incorporates the services of Deb's Sewing.Schmidt purchases pre-cut dresses from Deb's.This is primarily known as ________.

Which of the following minimizes the risks of outsourcing?

Which of the following is true of historical costs?

For short-run product-mix decisions,maximizing contribution margin will also result in maximizing operating income.

Factors used to decide whether to outsource a part include ________.

If Option 1 costs $120 and Option 2 costs $90,then the differential cost is $30.

Discontinuing unprofitable products will ________.

In linear programming,a constraint is a mathematical inequality or equality that must be satisfied by the variables in a mathematical model.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

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

Filters

Exam 11: Decision Making and Relevant Information

Outsourcing is purchasing goods and services from outside vendors.

Which of the following is a relevant cost to be included in a make-or-buy decision?

Based on the theory of constraints,investments equal ________.

Feedback regarding previous actions may affect ________.

Schmidt Sewing Company incorporates the services of Deb's Sewing.Schmidt purchases pre-cut dresses from Deb's.This is primarily known as ________.

Which of the following minimizes the risks of outsourcing?

Which of the following is true of historical costs?

For short-run product-mix decisions,maximizing contribution margin will also result in maximizing operating income.

Factors used to decide whether to outsource a part include ________.

If Option 1 costs $120 and Option 2 costs $90,then the differential cost is $30.

Discontinuing unprofitable products will ________.

In linear programming,a constraint is a mathematical inequality or equality that must be satisfied by the variables in a mathematical model.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

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

Filters