Question 1

Activity based costing (ABC)systems are less useful than the theory of constraints (TOC)for long-run pricing,cost control,and capacity management.

Accepted Answer

A) True 
 B)False

Question 2

Equal weight must be given to qualitative factors and quantitative nonfinancial factors while making decisions.

Accepted Answer

A) True 
 B)False

Question 3

In product-mix decisions,managers should ________.

Accepted Answer

A)  always focus on maximizing total contribution margin 
B)  only focus on the product with the greatest contribution margin per machine-hour 
C)  only focus on the full costs of the product 
D)  always focus on maximizing the selling price of the product 
A)  always focus on maximizing total contribution margin 
B)  only focus on the product with the greatest contribution margin per machine-hour 
C)  only focus on the full costs of the product 
D)  always focus on maximizing the selling price of the product

Question 4

If management takes a multiple-year view in the decision model and judges success according to the current year's results,a problem will occur in the ________.

Accepted Answer

A)  decision model 
B)  performance evaluation model 
C)  production evaluation model 
D)  quantitative model 
A)  decision model 
B)  performance evaluation model 
C)  production evaluation model 
D)  quantitative model

Question 5

With a constraining resource,managers should choose the product with the ________.

Accepted Answer

A)  lowest contribution margin per unit of the constraining resource 
B)  highest sales price 
C)  highest contribution margin per unit of the constraining resource 
D)  highest gross profit 
A)  lowest contribution margin per unit of the constraining resource 
B)  highest sales price 
C)  highest contribution margin per unit of the constraining resource 
D)  highest gross profit

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Answer the following questions using the information below:
Black Forrest manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $180 per table, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Back Forrest's policy to add a 50% markup to full costs.
-A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Black Forrest Incorporated is invited to submit a bid to the hotel chain.What is the lowest price per unit Black Forrest should bid on this long-term order?

Accepted Answer

A)  $126 
B)  $144 
C)  $180 
D)  $270 
A)  $126 
B)  $144 
C)  $180 
D)  $270

Question 8

Quantitative factors,such as direct material costs,are outcomes that are measured in numerical terms.

Accepted Answer

A) True 
 B)False

Question 9

When replacing an old machine with a new machine,the book value of the old machine is a relevant cost.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of insourcing?

Accepted Answer

A)  a pharmaceutical company's research team developing a new patent using current resources 
B)  a smartphone manufacturing company factoring its receivables as a source of capital 
C)  a large conglomerate company selling a business wing to its competitor 
D)  a petrochemical company assigning a vendor to make software for its supply chain management 
A)  a pharmaceutical company's research team developing a new patent using current resources 
B)  a smartphone manufacturing company factoring its receivables as a source of capital 
C)  a large conglomerate company selling a business wing to its competitor 
D)  a petrochemical company assigning a vendor to make software for its supply chain management

Question 11

Which of the following is an example of outsourcing?

Accepted Answer

A)  a smartphone manufacturing company factoring its receivables as a source of capital 
B)  a large conglomerate company selling a business wing to its competitor 
C)  an automobile company merging with a manufacturing firm to create economic synergies 
D)  a petrochemical company assigning a vendor to make software for its supply chain management 
A)  a smartphone manufacturing company factoring its receivables as a source of capital 
B)  a large conglomerate company selling a business wing to its competitor 
C)  an automobile company merging with a manufacturing firm to create economic synergies 
D)  a petrochemical company assigning a vendor to make software for its supply chain management

Question 12

Answer the following questions using the information below:
Aurum Appliances manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below.
 $\begin{array}{lcrrr}
&\text { Small }&\text { Medium }&\text { Large }\
\text { Unit selling price }&\$400&\$600&\$1,200\\text { Unit costs: }\
\text { Variable manufacturing } & (220) & (280) & (500) \
\text { F1×ed manufacturing } & (80) & (130) & (240) \
\text { Fixed selling and administrative } & (60) & (75) & (120) \
\text { Unit profit } & \$ 40 & \$ 115 & \$ 340\\
\text { Demand in units } & 100 & 120 & 100 \
\text { Machine-hours per unit } & 20 & 40 & 100
\end{array}$ The maximum machine-hours available are 6,000 per week.
-Which of the three product models should be produced first if management incorporates a short-run profit maximizing strategy?

Accepted Answer

A)  small appliance 
B)  medium appliance 
C)  large appliance 
D)  both medium and large appliance 
A)  small appliance 
B)  medium appliance 
C)  large appliance 
D)  both medium and large appliance

Question 13

Answer the following questions using the information below:
John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again. His wife, Sherry, suggested that he should buy a 5-year-old used Jeep Grand Cherokee instead for $6,000 cash. Sherry estimated the following costs for the two cars:
 $\begin{array}{lrr}&\text { Trail Blazer }&\text { Grand Cherokee }\
\text { Acquisition cost } & \$ 25,000 & \$ 6,000 \
\text { Repairs } & \$ 6,000 & - \
\text { Annual operating costs } & & \
\text { (Gas, maintenance, insurance) } & \$ 2,280 & \$ 2,100
\end{array}$
-What should John do? What are his savings in the first year?

Accepted Answer

A)  Buy the Grand Cherokee; $8,100 
B)  Fix the Trail Blazer; $3,180 
C)  Buy the Grand Cherokee; $180 
D)  Fix the Trail Blazer; $6,280 
A)  Buy the Grand Cherokee; $8,100 
B)  Fix the Trail Blazer; $3,180 
C)  Buy the Grand Cherokee; $180 
D)  Fix the Trail Blazer; $6,280

Question 14

Clinton Company sells two items,product A and product B.The company is considering dropping product B.It is expected that sales of product A will increase by 405 as a result.Dropping product B will allow the company to cancel its monthly equipment rental costing $100 per month.The other existing equipment will be used for additional production of product A.One employee earning $200 per month can be terminated if product B production is dropped.Clinton's other fixed costs are allocated and will continue regardless of the decision made.A condensed,budgeted monthly income statement with both products follows:
 $\begin{array}{lrrr}&\text { Product } A&\text { Product } B&\text { Product } C\
\text { Sales } & \$ 10,000 & \$ 8,000 & \$ 18,000 \
\text { Direct materials } & 2,500 & 2,000 & 4,500 \
\text { Direct labor } & 2,000 & 1,200 & 3,200\
\text { Equipment rental } & 300 & 2,600 & 2,900 \
\text { Other allocated overhead } & 1,000 & 2,100 & 3,100 \
\text { Operating income } & \$ 4,200 & \$ 100 & \$ 4,300
\end{array}$ Required:
Prepare an incremental analysis to determine the financial effect of dropping product B.

Accepted Answer

Incrementa

Question 15

Assume you are a sophomore in college and are committed to earning an undergraduate degree.Your current decision is whether to finish college 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.Identify at least two opportunity costs for this decision.
d.Comment on at least one qualitative consideration for this decision.

Accepted Answer

a.Relevant revenues/costs are those that

Question 16

Snapper Tool Company has a production capacity of 3,000 units per month,but current production is only 2,500 units.Total manufacturing costs are $60 per unit and marketing costs are $16 per unit.Doug Levy offers to purchase 500 units at $76 each for the next five months.Should Snapper accept the one-time-only special order if only absorption-costing data are available?

Accepted Answer

A)  Yes, good customer relations are essential. 
B)  No, the company will only break even. 
C)  No, since only the employees will benefit. 
D)  Yes, since operating profits will most likely increase. 
A)  Yes, good customer relations are essential. 
B)  No, the company will only break even. 
C)  No, since only the employees will benefit. 
D)  Yes, since operating profits will most likely increase.

Question 17

In relevant-cost analysis,managers should not consider all variable as relevant and all fixed costs as irrelevant.

Accepted Answer

A) True 
 B)False

Question 18

Qualitative factors,as well as relevant revenues and relevant costs need to be considered when selecting among alternatives.

Accepted Answer

A) True 
 B)False

Question 19

Quantitative factors ________.

Accepted Answer

A)  include financial information, but not nonfinancial information 
B)  can be expressed in monetary terms 
C)  are always relevant when making decisions 
D)  include employee morale 
A)  include financial information, but not nonfinancial information 
B)  can be expressed in monetary terms 
C)  are always relevant when making decisions 
D)  include employee morale

Question 20

Which of the following methods is used to determine the most profitable production schedule and the most profitable product mix?

Accepted Answer

A)  balanced scorecard 
B)  cause and effect diagram 
C)  transfer pricing 
D)  linear programming 
A)  balanced scorecard 
B)  cause and effect diagram 
C)  transfer pricing 
D)  linear programming

Activity based costing (ABC)systems are less useful than the theory of constraints (TOC)for long-run pricing,cost control,and capacity management.

Equal weight must be given to qualitative factors and quantitative nonfinancial factors while making decisions.

In product-mix decisions,managers should ________.

If management takes a multiple-year view in the decision model and judges success according to the current year's results,a problem will occur in the ________.

With a constraining resource,managers should choose the product with the ________.

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

Quantitative factors,such as direct material costs,are outcomes that are measured in numerical terms.

When replacing an old machine with a new machine,the book value of the old machine is a relevant cost.

Which of the following is an example of insourcing?

Which of the following is an example of outsourcing?

In relevant-cost analysis,managers should not consider all variable as relevant and all fixed costs as irrelevant.

Qualitative factors,as well as relevant revenues and relevant costs need to be considered when selecting among alternatives.

Quantitative factors ________.

Which of the following methods is used to determine the most profitable production schedule and the most profitable product mix?

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

Activity based costing (ABC)systems are less useful than the theory of constraints (TOC)for long-run pricing,cost control,and capacity management.

Equal weight must be given to qualitative factors and quantitative nonfinancial factors while making decisions.

In product-mix decisions,managers should ________.

If management takes a multiple-year view in the decision model and judges success according to the current year's results,a problem will occur in the ________.

With a constraining resource,managers should choose the product with the ________.

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

Quantitative factors,such as direct material costs,are outcomes that are measured in numerical terms.

When replacing an old machine with a new machine,the book value of the old machine is a relevant cost.

Which of the following is an example of insourcing?

Which of the following is an example of outsourcing?

In relevant-cost analysis,managers should not consider all variable as relevant and all fixed costs as irrelevant.

Qualitative factors,as well as relevant revenues and relevant costs need to be considered when selecting among alternatives.

Quantitative factors ________.

Which of the following methods is used to determine the most profitable production schedule and the most profitable product mix?

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