Question 1

Full costs of a product are the sum of ________.

Accepted Answer

A)  fixed costs and sunk costs in all the business functions of the value chain 
B)  variable costs and sunk costs in all the business functions of the value chain 
C)  all variable and fixed costs in all the business functions of the value chain 
D)  fixed costs, variable costs, and sunk costs in the value chain 
A)  fixed costs and sunk costs in all the business functions of the value chain 
B)  variable costs and sunk costs in all the business functions of the value chain 
C)  all variable and fixed costs in all the business functions of the value chain 
D)  fixed costs, variable costs, and sunk costs in the value chain

Question 2

Operating costs include all operating costs except depreciation.

Accepted Answer

A) True 
 B)False

Question 3

Answer the following questions using the information below:
Genent's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 0.50 \
\text { Direct labor } & 0.06 \
\text { Unit-related support costs } & 0.20 \
\text { Batch-related support costs } & 0.24 \
\text { Product-sustaining support costs } & 0.44 \
\text { Facility-sustaining support costs } & 0.56 \
\quad \text { Total cost per jar } & \$ 2.00
\end{array}$$
-The maximum price that Genent's Preserves should be willing to pay for the decorative jars is ________.

Accepted Answer

A)  $0.56 per jar 
B)  $0.76 per jar 
C)  $0.44 per jar 
D)  $2.00 per jar 
A)  $0.56 per jar 
B)  $0.76 per jar 
C)  $0.44 per jar 
D)  $2.00 per jar

Question 4

Business function costs are the sum of all variable and fixed costs in all business functions of the value chain.

Accepted Answer

A) True 
 B)False

Question 5

Fluty Corporation manufactures a product that has two parts,A and B.It is currently considering two alternative proposals related to these parts.
The first proposal is for buying Part A.This would free up some of the plant space for the manufacture of more of Part B and assembly of the final product.The product vice president believes the additional production of the final product can be sold at the current market price.No other changes in manufacturing would be needed.
The second proposal is for buying new equipment for the production of Part B.The new equipment requires fewer workers and uses less power to operate.The old equipment has a net disposal value of zero.
Required:
Tell whether the following items are relevant or irrelevant for each proposal.Treat each proposal independently.
 a. Total variable manufacturing overhead, Part A
b. Total variable manufacturing overhead, Part B
c. Cost of old equipment for manufacturing Part B
d. Cost of new equipment for manufacturing Part B
e. Total variable selling and administrative costs
f.Sales revenue of the product
g. Total variable costs of assembling final products
h. Total direct manufacturing materials, Part $ A $ Total 
i.direct manufacturing materials, Part B Total direct 
j.manufacturing labor, Part A
k. Total direct manufacturing labor, Part B

Accepted Answer

The answer of Fluty Corporation manufactures a product that has...

Question 6

Which of following is a firm's risk of outsourcing the production of a part?

Accepted Answer

A)  fluctuation in the manufacturing costs 
B)  leakage of intellectual property 
C)  increased need of skilled workers 
D)  scarcity of indirect labor 
A)  fluctuation in the manufacturing costs 
B)  leakage of intellectual property 
C)  increased need of skilled workers 
D)  scarcity of indirect labor

Question 7

Which of the following would be considered in a make-or-buy decision?

Accepted Answer

A)  fixed costs that will no longer be incurred 
B)  prepaid rent expense for warehousing finished goods and inventories 
C)  potential rental income from space occupied by the production area 
D)  unchanged supervisory costs 
A)  fixed costs that will no longer be incurred 
B)  prepaid rent expense for warehousing finished goods and inventories 
C)  potential rental income from space occupied by the production area 
D)  unchanged supervisory costs

Question 8

Answer the following questions using the information below:
Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
 $\begin{array}{lr}
\text { Direct materials } & \$ 46,000 \
\text { Direct labor } & 11,500 \
\text { Variable overhead costs } & 34,500 \
\text { Fixed overhead costs } & 23,000 \
\quad \text { Total costs } & \$ 115,000
\end{array}$ It is estimated that 8% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent's Engine Company has the option of purchasing the part from an outside supplier at $97.75 per unit.
-If Genent's Engine Company purchases 1,000 TE456 parts from the outside supplier per month,then its monthly operating income will ________.

Accepted Answer

A)  increase by $3,910 
B)  increase by $19,090 
C)  decrease by $3,910 
D)  decrease by $19,090 
A)  increase by $3,910 
B)  increase by $19,090 
C)  decrease by $3,910 
D)  decrease by $19,090

Question 9

Product mix decisions ________.

Accepted Answer

A)  have a long-run focus 
B)  help determine how to maximize operating profits 
C)  focus on selling price per unit 
D)  help maximizing opportunity costs 
A)  have a long-run focus 
B)  help determine how to maximize operating profits 
C)  focus on selling price per unit 
D)  help maximizing opportunity costs

Question 10

A supplier offers to make Part A for $35.Altec Services Corporation has relevant costs of $40 a unit to manufacture 1,000 units of Part A.If there is excess capacity,the opportunity cost of buying Part A from the supplier is ________.

Accepted Answer

A)  $0 
B)  $40,000 
C)  $35,000 
D)  $75,000 
A)  $0 
B)  $40,000 
C)  $35,000 
D)  $75,000

Question 11

An example of a qualitative factor for the decision-making process is ________

Accepted Answer

A)  customer satisfaction 
B)  employee wages 
C)  audit report 
D)  manufacturing overhead 
A)  customer satisfaction 
B)  employee wages 
C)  audit report 
D)  manufacturing overhead

Question 12

Avoidable variable and fixed costs should be evaluated when deciding whether to discontinue a product,product line,business segment,or customer.

Accepted Answer

A) True 
 B)False

Question 13

When making decisions ________.

Accepted Answer

A)  more weightage should be given to qualitative factors 
B)  more weightage should be given to quantitative factors 
C)  appropriate weight must be given to both quantitative and qualitative factors 
D)  both quantitative and qualitative factors are unimportant 
A)  more weightage should be given to qualitative factors 
B)  more weightage should be given to quantitative factors 
C)  appropriate weight must be given to both quantitative and qualitative factors 
D)  both quantitative and qualitative factors are unimportant

Question 14

Determining which products should be produced when the plant is operating at full capacity is referred to as a(n)________.

Accepted Answer

A)  outsourcing analysis 
B)  total alternative approach 
C)  product-mix decision 
D)  short-run focus decision 
A)  outsourcing analysis 
B)  total alternative approach 
C)  product-mix decision 
D)  short-run focus decision

Question 15

Altec Services Corporation has relevant costs of $40 per unit to manufacture 1,000 units of Part A.A current supplier offers to make Part A for $35 per unit.Alternatively,the company can rent out the capacity for $25,000.If capacity is constrained,the opportunity cost of buying Part A from the supplier is ________.

Accepted Answer

A)  $0 
B)  $5,000 
C)  $35,000 
D)  $25,000 
A)  $0 
B)  $5,000 
C)  $35,000 
D)  $25,000

Question 16

For make-or-buy decisions,relevant costs include ________.

Accepted Answer

A)  incremental costs plus sunk costs 
B)  incremental costs plus opportunity costs 
C)  differential costs plus fixed costs 
D)  incremental costs plus differential costs 
A)  incremental costs plus sunk costs 
B)  incremental costs plus opportunity costs 
C)  differential costs plus fixed costs 
D)  incremental costs plus differential costs

Question 17

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

Accepted Answer

A)  fixed manufacturing costs 
B)  units sold 
C)  material cost 
D)  labor hours incurred 
A)  fixed manufacturing costs 
B)  units sold 
C)  material cost 
D)  labor hours incurred

Question 18

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is ________.

Accepted Answer

A)  focused on short-term performance 
B)  based solely on quantitative factors 
C)  consistent with the decision model 
D)  based solely on qualitative factors 
A)  focused on short-term performance 
B)  based solely on quantitative factors 
C)  consistent with the decision model 
D)  based solely on qualitative factors

Question 19

Relevant costs in a make-or-buy decision of a part include ________.

Accepted Answer

A)  setup overhead for the manufacture of the product using the outsourced part 
B)  currently used manufacturing capacity that has alternative uses 
C)  annual plant insurance costs that will remain the same 
D)  management consultant fees to restructure the organization framework of the company 
A)  setup overhead for the manufacture of the product using the outsourced part 
B)  currently used manufacturing capacity that has alternative uses 
C)  annual plant insurance costs that will remain the same 
D)  management consultant fees to restructure the organization framework of the company

Question 20

Answer the following questions using the information below:
Genent's Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 0.50 \
\text { Direct labor } & 0.06 \
\text { Unit-related support costs } & 0.20 \
\text { Batch-related support costs } & 0.24 \
\text { Product-sustaining support costs } & 0.44 \
\text { Facility-sustaining support costs } & 0.56 \
\quad \text { Total cost per jar } & \$ 2.00
\end{array}$$
-When deciding to lease a new cutting machine or continue using the old machine,the irrelevant cost is ________.

Accepted Answer

A)  $50,000, cost of the old machine 
B)  $20,000, cost of the new machine 
C)  $10,000, selling price of the old machine 
D)  $3,000, annual savings in operating costs if the new machine is purchased 
A)  $50,000, cost of the old machine 
B)  $20,000, cost of the new machine 
C)  $10,000, selling price of the old machine 
D)  $3,000, annual savings in operating costs if the new machine is purchased

Full costs of a product are the sum of ________.

Operating costs include all operating costs except depreciation.

Business function costs are the sum of all variable and fixed costs in all business functions of the value chain.

Which of following is a firm's risk of outsourcing the production of a part?

Which of the following would be considered in a make-or-buy decision?

Product mix decisions ________.

A supplier offers to make Part A for $35.Altec Services Corporation has relevant costs of $40 a unit to manufacture 1,000 units of Part A.If there is excess capacity,the opportunity cost of buying Part A from the supplier is ________.

An example of a qualitative factor for the decision-making process is ________

Avoidable variable and fixed costs should be evaluated when deciding whether to discontinue a product,product line,business segment,or customer.

When making decisions ________.

Determining which products should be produced when the plant is operating at full capacity is referred to as a(n)________.

For make-or-buy decisions,relevant costs include ________.

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is ________.

Relevant costs in a make-or-buy decision of a part include ________.

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

Full costs of a product are the sum of ________.

Operating costs include all operating costs except depreciation.

Business function costs are the sum of all variable and fixed costs in all business functions of the value chain.

Which of following is a firm's risk of outsourcing the production of a part?

Which of the following would be considered in a make-or-buy decision?

Product mix decisions ________.

A supplier offers to make Part A for $35.Altec Services Corporation has relevant costs of $40 a unit to manufacture 1,000 units of Part A.If there is excess capacity,the opportunity cost of buying Part A from the supplier is ________.

An example of a qualitative factor for the decision-making process is ________

Avoidable variable and fixed costs should be evaluated when deciding whether to discontinue a product,product line,business segment,or customer.

When making decisions ________.

Determining which products should be produced when the plant is operating at full capacity is referred to as a(n)________.

For make-or-buy decisions,relevant costs include ________.

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is ________.

Relevant costs in a make-or-buy decision of a part include ________.

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