Question 1

A choice between internal and external production is a make-or-buy decision.

Accepted Answer

A) True 
 B)False

Question 2

Senior Company currently buys 30,000 units of a part used to manufacture its product at $40 per unit.Recently the supplier informed Senior Company that a 20% increase will take effect next year.Senior has some additional space and could produce the units for the following per-unit costs (based on 30,000 units): $\begin{array}{lr}
\text { Direct materials } & \$ 16 \
\text { Direct labour } & 12 \
\text { Variable overhead } & 12 \
\text { Fixed overhead } & 10 \
\text { Total } & \$ 50
\end{array}$ If the units are purchased from the supplier,$200,000 of fixed costs will continue to be incurred.In addition,the plant can be rented out for $20,000 per year if the parts are purchased externally.
Required: Should Senior Company buy the part externally or make it internally?

Accepted Answer

Produce internally;

Question 3

$\begin{array}{lr}
\text { Direct materials } & \$ 8 \
\text { Direct labour } & 2 \
\text { Variable overhead } & 1 \
\text { Fixed overhead } & 4
\end{array}$ 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.Assume that specialized moulding equipment time is the only constrained resource,and that EBP can sell as many tubs and sinks as it can produce.How many sinks should be sold?

Accepted Answer

A)  0 
B)  810 
C)  2,025 
D)  2,050 
A)  0 
B)  810 
C)  2,025 
D)  2,050

Question 4

Entertech Company is designing a tablet aimed at families travelling with young children.The company believes that the product can be sold for $150,and it requires a 25% profit on new products.What is the target cost of the tablet?

Accepted Answer

A)  $28.00 
B)  $112.50 
C)  $140.00 
D)  $187.50 
A)  $28.00 
B)  $112.50 
C)  $140.00 
D)  $187.50

Question 5

Roberts Company produces two types of gears,Gear A and Gear B,with unit contribution margins of $6 and $8,respectively.Each gear must spend time on a special machine.The firm owns five machines that together provide 12,000 hours of machine time per year.Gear A requires 12 minutes of machine time; Gear B requires 24 minutes of machine time. A. What is the contribution margin per hour of machine time for Gear $\mathrm { A }$ ? And for Gear $\mathrm { B }$ ? If Roberts faces only the production constraint ( 12,000 hours of machine time), how
B. many units of Gear A should be produced? And how many units of Gear $B$ ? What is the total contribution margin from this product mix?
Now suppose that Robert cannot sell more than 45,000 units of each type of gear. How
C. many units of Gear $A$ should be produced? And how many units of Gear $B$ ? What is the total contribution margin from this product mix?

Accepted Answer

The answer of Roberts Company produces two types of gears,Gear...

Question 6

Which of the following costs is the depreciation of equipment an example of?

Accepted Answer

A)  a relevant cost 
B)  an opportunity cost 
C)  a sunk cost 
D)  a variable cost 
A)  a relevant cost 
B)  an opportunity cost 
C)  a sunk cost 
D)  a variable cost

Question 7

Western Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 75,000 \
\text { Direct labour } & 120,000 \
\text { Variable manufacturing overhead } & 45,000 \
\text { Fixed manufacturing overhead } & 60,000 \
\text { Total } & \$ 300,000
\end{array}$$ An outside supplier has offered to sell the component for $12.75. Western Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Western purchases the component from the outside supplier?

Accepted Answer

A)  a $135,000 increase 
B)  a $165,000 decrease 
C)  a $195,000 increase 
D)  a $225,000 decrease 
A)  a $135,000 increase 
B)  a $165,000 decrease 
C)  a $195,000 increase 
D)  a $225,000 decrease

Question 8

Shredder Inc.produces paper shredders.Shredder is considering a new shredder design for home offices.The marketing vice president believes that a basic unit in a variety of attractive colours could be sold for $100.Shredder requires that all new products yield 35% profit.What is the target cost of the new shredder?

Accepted Answer

A)  $21 
B)  $35 
C)  $65 
D)  $135 
A)  $21 
B)  $35 
C)  $65 
D)  $135

Question 9

Match each statement with the correct item below.
-Constraints

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

A choice between internal and external production is a make-or-buy decision.

Entertech Company is designing a tablet aimed at families travelling with young children.The company believes that the product can be sold for $150,and it requires a 25% profit on new products.What is the target cost of the tablet?

Which of the following costs is the depreciation of equipment an example of?

Match each statement with the correct item below. -Constraints

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

A choice between internal and external production is a make-or-buy decision.

Entertech Company is designing a tablet aimed at families travelling with young children.The company believes that the product can be sold for $150,and it requires a 25% profit on new products.What is the target cost of the tablet?

Which of the following costs is the depreciation of equipment an example of?

Match each statement with the correct item below. -Constraints

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