Question 1

What costing method determines the cost of a product or service on the basis of the price that customers are willing to pay?

Accepted Answer

A)  relevant costing 
B)  differential costing 
C)  target costing 
D)  product costing 
A)  relevant costing 
B)  differential costing 
C)  target costing 
D)  product costing C

Question 2

When determining the target price of a good,the company must first determine the target cost and the desired profit.

Accepted Answer

A) True 
 B)False  False

Question 3

Sunk costs are always irrelevant.

Accepted Answer

A) True 
 B)False  True

Question 4

Travers Company sets prices equal to cost plus 55%.Recently,Travers charged a customer a price of $60 for an item.What was the cost of the item to Travers?

Accepted Answer

A)  $25.20 
B)  $38.71 
C)  $40.32 
D)  $42.00 
A)  $25.20 
B)  $38.71 
C)  $40.32 
D)  $42.00

Question 5

Refer to the Figure.Which of the following is NOT relevant to the special-order decision?

Accepted Answer

A)  the cost of yarn and backing 
B)  the direct labour cost 
C)  the machining and electricity cost 
D)  the $30 price 
A)  the cost of yarn and backing 
B)  the direct labour cost 
C)  the machining and electricity cost 
D)  the $30 price

Question 6

$\begin{array}{lr}
\text { Direct materials } & \$ 8 \
\text { Direct labour } & 2 \
\text { Variable overhead } & 1 \
\text { Fixed overhead } & 4
\end{array}$ ProPrinters uses 100,000 units of 87A per year.Printers R Us has offered to sell ProPrinters 100,000 units of 87A per year for $12.Fixed overhead is unavoidable.
-Refer to the Figure.What is the contribution margin per hour of machine time for a plain leg?

Accepted Answer

A)  $8 
B)  $12 
C)  $24 
D)  $32 
A)  $8 
B)  $12 
C)  $24 
D)  $32

Question 7

All fixed costs are always relevant.

Accepted Answer

A) True 
 B)False

Question 8

Acron Construction charges each customer a price equal to the cost of direct materials and direct labour plus 40%.Job 126 included the following costs: $\begin{array} { l  }
 \text {Direct materials }&\$60,000\ \text {Direct labour }&\$45,000\
\end{array}$
 What price does Acron charge for Job 126?

Accepted Answer

A)  $46,800 
B)  $65,400 
C)  $86,000 
D)  $148,400 
A)  $46,800 
B)  $65,400 
C)  $86,000 
D)  $148,400

Question 9

Refer to the Figure.If Tine accepts the special order,by how much will operating income increase or decrease?

Accepted Answer

A)  $13,000 decrease 
B)  $3,000 decrease 
C)  $3,000 increase 
D)  $13,000 increase 
A)  $13,000 decrease 
B)  $3,000 decrease 
C)  $3,000 increase 
D)  $13,000 increase

Question 10

Walbom Company produced 200 defective units last month at a unit manufacturing cost of $40.The defective units were discovered before leaving the plant.Walbom can sell them "as is" for $30 or can rework them at a cost of $25 and sell them at the regular price of $60.What is the total relevant cost of reworking the defective units?

Accepted Answer

A)  $2,250 
B)  $3,000 
C)  $5,000 
D)  $6,750 
A)  $2,250 
B)  $3,000 
C)  $5,000 
D)  $6,750

Question 11

RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?

Accepted Answer

A)  The budgeted product cost is $20,000. 
B)  $6,207 includes selling and administrative expense and profit. 
C)  All costs pertaining to the job total $20,000. 
D)  $6,207 includes fixed overhead,selling and administrative expense,and profit. 
A)  The budgeted product cost is $20,000. 
B)  $6,207 includes selling and administrative expense and profit. 
C)  All costs pertaining to the job total $20,000. 
D)  $6,207 includes fixed overhead,selling and administrative expense,and profit.

Question 12

Match each statement with the correct item below.
-Target costing

Accepted Answer

A) The difference in total cost between the alternatives in a decision 
B) Determines whether or not a segment should be kept or dropped 
C) Limited resources and limited demand for each product 
D) A specific set of procedures that produces a decision 
E) The point that products that have common processes and costs of production become distinguishable
F)CHOICE BLANK..
G)CHOICE BLANK.
H)Method of determining the cost of a product based on the price that customers are willing to pay
Decisions involving a choice between internal and external production
Products that have common processes and costs of production up to a point
I)Past costs that cannot be affected by future decisions
J)A percentage applied to the base cost to cover other costs plus profit
K)Determines whether a specially priced order should be accepted or rejected
L)Determines whether it is more profitable to process a joint product further
M)Future costs that differ between alternatives
N)CHOICE BLANK
O)When a company calculates product cost then adds the desired profit
The benefit given up when one alternative is chosen over another 
A) The difference in total cost between the alternatives in a decision 
B) Determines whether or not a segment should be kept or dropped 
C) Limited resources and limited demand for each product 
D) A specific set of procedures that produces a decision 
E) The point that products that have common processes and costs of production become distinguishable
F)CHOICE BLANK..
G)CHOICE BLANK.
H)Method of determining the cost of a product based on the price that customers are willing to pay
Decisions involving a choice between internal and external production
Products that have common processes and costs of production up to a point
I)Past costs that cannot be affected by future decisions
J)A percentage applied to the base cost to cover other costs plus profit
K)Determines whether a specially priced order should be accepted or rejected
L)Determines whether it is more profitable to process a joint product further
M)Future costs that differ between alternatives
N)CHOICE BLANK
O)When a company calculates product cost then adds the desired profit
The benefit given up when one alternative is chosen over another

Question 13

The following information relates to a product produced by Creamer Company: $\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labour } & 15 \
\text { Variable overhead } & 30 \
\text { Fined overhead } & 18 \
\text { Unit cost } & \$ 87
\end{array}$ Fixed selling costs are $500,000 per year,and variable selling costs are $12 per unit sold.Although production capacity is 600,000 units per year,the company expects to produce only 400,000 units next year.The product normally sells for $120 each.A customer has offered to buy 60,000 units for $90 each. What is the incremental cost per unit associated with the special order?

Accepted Answer

A)  $64 
B)  $69 
C)  $81 
D)  $84 
A)  $64 
B)  $69 
C)  $81 
D)  $84

Question 14

In short-run decision making,the alternative with the lowest overall cost is always chosen.

Accepted Answer

A) True 
 B)False

Question 15

Calculus provides a special technique that can be used to determine the optimal product mix when there are multiple constraints.

Accepted Answer

A) True 
 B)False

Question 16

Which qualitative factor should NOT be considered when evaluating a make-or-buy decision?

Accepted Answer

A)  the quality of the outside supplier's product 
B)  whether the outside supplier can provide the needed quantities 
C)  whether the outside supplier can provide the product when it is needed 
D)  the split-off costs of the product 
A)  the quality of the outside supplier's product 
B)  whether the outside supplier can provide the needed quantities 
C)  whether the outside supplier can provide the product when it is needed 
D)  the split-off costs of the product

Question 17

What kind of decision involves potentially converting crude oil into diesel fuel?

Accepted Answer

A)  a relevant decision 
B)  a make-or-buy decision 
C)  a sell-or-process-further decision 
D)  a special order decision 
A)  a relevant decision 
B)  a make-or-buy decision 
C)  a sell-or-process-further decision 
D)  a special order decision

Question 18

Bars Manufacturing Company produces Products A1,B2,C3,and D4 through a joint process.The joint costs amount to $200,000. $\begin{array}{rrrrr}&&&\text { If Processed Further }\
&\text { Units }&\text { Sales Value }&\text {Additional}&\text { Sales }\
\text { Product }&\text { Produced }&\text { Sales split-Off }&\text { Costs }&\text { Value }\
A 1 & 3,000 & \$ 10,000 & \$ 2,500 & \$ 15,000 \
\mathrm{~B} 2 & 5,000 & 30,000 & 3,000 & 35,000 \
\mathrm{C} 3 & 4,000 & 20,000 & 4,000 & 25,000 \
\mathrm{D} 4 & 6,000 & 40,000 & 6,000 & 45,000
\end{array}$ Suppose Product B2 is processed further.What will be the effect on profits?

Accepted Answer

A)  Profits will decrease by $3,000. 
B)  Profits will increase by $2,000. 
C)  Profits will increase by $30,000. 
D)  Profits will increase by $32,000. 
A)  Profits will decrease by $3,000. 
B)  Profits will increase by $2,000. 
C)  Profits will increase by $30,000. 
D)  Profits will increase by $32,000.

Question 19

MacAllister Company charges cost plus 35%.Suppose the price of an item is $90.What is the item's cost?

Accepted Answer

A)  $50.00 
B)  $62.50 
C)  $66.67 
D)  $80.00 
A)  $50.00 
B)  $62.50 
C)  $66.67 
D)  $80.00

Question 20

Why does a special-order decision frequently ignore fixed factory overhead?

Accepted Answer

Special order decisions are,by definitio

What costing method determines the cost of a product or service on the basis of the price that customers are willing to pay?

When determining the target price of a good,the company must first determine the target cost and the desired profit.

Sunk costs are always irrelevant.

Travers Company sets prices equal to cost plus 55%.Recently,Travers charged a customer a price of $60 for an item.What was the cost of the item to Travers?

Refer to the Figure.Which of the following is NOT relevant to the special-order decision?

All fixed costs are always relevant.

Acron Construction charges each customer a price equal to the cost of direct materials and direct labour plus 40%.Job 126 included the following costs: Direct materials \6 0,000 Direct labour \4 5,000 What price does Acron charge for Job 126?

Refer to the Figure.If Tine accepts the special order,by how much will operating income increase or decrease?

RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?

Match each statement with the correct item below. -Target costing

In short-run decision making,the alternative with the lowest overall cost is always chosen.

Calculus provides a special technique that can be used to determine the optimal product mix when there are multiple constraints.

Which qualitative factor should NOT be considered when evaluating a make-or-buy decision?

What kind of decision involves potentially converting crude oil into diesel fuel?

MacAllister Company charges cost plus 35%.Suppose the price of an item is $90.What is the item's cost?

Why does a special-order decision frequently ignore fixed factory overhead?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Budgeting, production, cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Filters

Exam 13: Short-Run Decision Making: Relevant Costing

What costing method determines the cost of a product or service on the basis of the price that customers are willing to pay?

When determining the target price of a good,the company must first determine the target cost and the desired profit.

Sunk costs are always irrelevant.

Travers Company sets prices equal to cost plus 55%.Recently,Travers charged a customer a price of $60 for an item.What was the cost of the item to Travers?

Refer to the Figure.Which of the following is NOT relevant to the special-order decision?

All fixed costs are always relevant.

Acron Construction charges each customer a price equal to the cost of direct materials and direct labour plus 40%.Job 126 included the following costs: Direct materials \6 0,000 Direct labour \4 5,000 What price does Acron charge for Job 126?

Refer to the Figure.If Tine accepts the special order,by how much will operating income increase or decrease?

RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?

Match each statement with the correct item below. -Target costing

In short-run decision making,the alternative with the lowest overall cost is always chosen.

Calculus provides a special technique that can be used to determine the optimal product mix when there are multiple constraints.

Which qualitative factor should NOT be considered when evaluating a make-or-buy decision?

What kind of decision involves potentially converting crude oil into diesel fuel?

MacAllister Company charges cost plus 35%.Suppose the price of an item is $90.What is the item's cost?

Why does a special-order decision frequently ignore fixed factory overhead?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Budgeting, production, cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Filters