Question 1

Matching
​
Match each statement with the correct item below.
-​Special-order decisions

Accepted Answer

A) ​the difference in total cost between the alternatives in a decision 
B) ​determine 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 at which products that have common processes and costs of production become distinguishable
F)​method of determining the cost of a product based on the price that customers are willing to pay
G)​decisions involving a choice between internal and external production
H)​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)​determine whether a specially priced order should be accepted or rejected
L)​determine whether it is more profitable to process a joint product further 
A) ​the difference in total cost between the alternatives in a decision 
B) ​determine 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 at which products that have common processes and costs of production become distinguishable
F)​method of determining the cost of a product based on the price that customers are willing to pay
G)​decisions involving a choice between internal and external production
H)​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)​determine whether a specially priced order should be accepted or rejected
L)​determine whether it is more profitable to process a joint product further K

Question 2

The operations of Smits Corporation are divided into the Child Division and the Jackson Division.Projections for the next year are as follows: 
  Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be

Accepted Answer

A)  $22,500. 
B)  $40,000. 
C)  $50,000. 
D)  $60,000. 
A)  $22,500. 
B)  $40,000. 
C)  $50,000. 
D)  $60,000. A

Question 3

Which of the following decisions focuses on whether or not to perform further actions on joint products?

Accepted Answer

A)  The step decision 
B)  The make-or-buy decision 
C)  The sell-or-process-further decision 
D)  The restructuring-order decision 
E)  The keep-or-drop decision 
A)  The step decision 
B)  The make-or-buy decision 
C)  The sell-or-process-further decision 
D)  The restructuring-order decision 
E)  The keep-or-drop decision C

Question 4

Fuller Company makes frames.A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each.Normally, Fuller would charge $90 per frame for this type of order.Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup.The set-up charge costs are 100% labor.Currently, the workers needed to set up for and make the frames are working at Fuller.Their wages will be paid whether or not the special order is accepted.Fuller's policy is to avoid layoffs to the extent possible. 
- Which of the following is a qualitative factor that Fuller would consider in making the decision to accept or reject the special order?

Accepted Answer

A)  cost of yarn and backing 
B)  cost of setup labor 
C)  the no-layoff policy 
D)  the use of machinery 
E)  the machining and electricity 
A)  cost of yarn and backing 
B)  cost of setup labor 
C)  the no-layoff policy 
D)  the use of machinery 
E)  the machining and electricity

Question 5

Fuller Company makes frames.A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each.Normally, Fuller would charge $90 per frame for this type of order.Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup.The set-up charge costs are 100% labor.Currently, the workers needed to set up for and make the frames are working at Fuller.Their wages will be paid whether or not the special order is accepted.Fuller's policy is to avoid layoffs to the extent possible. 
-Which costs of the special order relate to flexible resources?

Accepted Answer

A)  wood and glass 
B)  wood, glass, and variable overhead 
C)  depreciation on machinery 
D)  wood, glass, and direct labor 
E)  wood, glass, direct labor, and setup labor 
A)  wood and glass 
B)  wood, glass, and variable overhead 
C)  depreciation on machinery 
D)  wood, glass, and direct labor 
E)  wood, glass, direct labor, and setup labor

Question 6

Sabor Inc.is a medical testing laboratory that performs several tests and analyses for hospitals in the area.Four of the tests that they perform require the use of a specialized machine that can supply 14,000 hours per year.Information on the four lab tests follows:  
  
-  What is the contribution margin per hour of machine time for Test B?

Accepted Answer

A)  $20.50 
B)  $33 
C)  $16.25 
D)  $16.50 
E)  $18 
A)  $20.50 
B)  $33 
C)  $16.25 
D)  $16.50 
E)  $18

Question 7

Which of the following is used to calculate the segment margin?

Accepted Answer

A)  Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs 
B)  Segment margin = Segment's sales revenue + Direct fixed costs + Contribution margin 
C)  Segment margin = Segment's sales revenue - Target cost + Contribution margin 
D)  Segment margin = Segment's Desired profit - Target cost + Contribution margin 
E)  Segment margin = Segment's marginal sales + Step cost + Contribution margin 
A)  Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs 
B)  Segment margin = Segment's sales revenue + Direct fixed costs + Contribution margin 
C)  Segment margin = Segment's sales revenue - Target cost + Contribution margin 
D)  Segment margin = Segment's Desired profit - Target cost + Contribution margin 
E)  Segment margin = Segment's marginal sales + Step cost + Contribution margin

Question 8

Primrose Yard receives 15,000 large trees each year that they process into 15,000 rough logs.Currently, Primrose sells the rough logs for $50 each.Primrose is considering processing the logs further into refined lumber.Each log can be processed into 350 feet of refined lumber at an additional cost of $0.20 per foot.The refined lumber can be sold for $0.80 per foot.  
Assume that the cost of getting the 15,000 large trees falls by half.Should Primrose sell the rough logs at split-off or process it further?

Accepted Answer

A)  It should process further because the reduction in the cost of trees makes that option more profitable than it was before. 
B)  It should sell at split-off because the decrease in cost price will increase the selling price of the logs. 
C)  It should sell at split-off because the reduction in the cost of the trees is irrelevant. 
D)  It should process further because the cost reduction will decrease the processing cost. 
E)  It should process further because the reduction in the cost of the trees is irrelevant. 
A)  It should process further because the reduction in the cost of trees makes that option more profitable than it was before. 
B)  It should sell at split-off because the decrease in cost price will increase the selling price of the logs. 
C)  It should sell at split-off because the reduction in the cost of the trees is irrelevant. 
D)  It should process further because the cost reduction will decrease the processing cost. 
E)  It should process further because the reduction in the cost of the trees is irrelevant.

Question 9

Victor's Detailing customers would be willing to pay $57 per detail.The company requires an 80% markup on each job.The average job would cost $30. Victor's Detailing uses markup pricing to set the price on each job.What is the price Victor should quote a new customer?

Accepted Answer

A)  $30 
B)  $24 
C)  $54 
D)  $84 
E)  $240 
A)  $30 
B)  $24 
C)  $54 
D)  $84 
E)  $240

Question 10

A choice between internal and external production is a keep-or-drop decision.

Accepted Answer

A) True 
 B)False

Question 11

Begonia uses part 87A in the production of color printers.Unit manufacturing costs for part 87A are:  
  Begonia uses 130,000 units of 87A per year.Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18.Fixed overhead is unavoidable.
 
Should Begonia make or buy the part?

Accepted Answer

A)  It should make the part because it will save $390,000 over buying it. 
B)  It should buy the part because it will save $390,000 over making it. 
C)  It should make the part because it will save $1,250,000 over buying it. 
D)  It should buy the part because it will save 1,250,000 over making it. 
E)  It should buy the part because it will save $340,000 over making it. 
A)  It should make the part because it will save $390,000 over buying it. 
B)  It should buy the part because it will save $390,000 over making it. 
C)  It should make the part because it will save $1,250,000 over buying it. 
D)  It should buy the part because it will save 1,250,000 over making it. 
E)  It should buy the part because it will save $340,000 over making it.

Question 12

The following information relates to a product produced by Marigold Company:  
 
   Fixed selling costs are $650,000 per year, and variable selling costs are $10 per unit sold.Although production capacity is 400,000 units per year, the company expects to produce only 250,000 units next year.The product normally sells for $100 each.A customer has offered to buy 40,000 units for $80 each.
The incremental cost per unit associated with the special order is:

Accepted Answer

A)  $76. 
B)  $60. 
C)  $90. 
D)  $84. 
A)  $76. 
B)  $60. 
C)  $90. 
D)  $84.

Question 13

The markup includes desired profit and any costs not included in the base cost.

Accepted Answer

A) True 
 B)False

Question 14

In the presence of multiple constraints the solution is considerably more complex than for one constraint and requires a technique known as ____________________.

Accepted Answer

The answer of In the presence of multiple constraints the...

Question 15

Connolly Company produces two types of lamps, classic and fancy, with unit contribution margins of $13 and $21, respectively.Each lamp must spend time on a special machine.The firm owns four machines that together provide 18,000 hours of machine time per year.The classic lamp requires 0.20 hours of machine time, the fancy lamp requires 0.50 hours of machine time. 
-
How many of each type of lamp must be sold to optimize total contribution margin?

Accepted Answer

A)  18,000 classic lamps; 0 fancy lamps 
B)  0 classic lamps; 30,000 fancy lamps 
C)  10,000 classic lamps; 10,000 fancy lamps 
D)  0 classic lamps; 9,000 fancy lamps 
E)  90,000 classic lamps; 0 fancy lamps 
A)  18,000 classic lamps; 0 fancy lamps 
B)  0 classic lamps; 30,000 fancy lamps 
C)  10,000 classic lamps; 10,000 fancy lamps 
D)  0 classic lamps; 9,000 fancy lamps 
E)  90,000 classic lamps; 0 fancy lamps

Question 16

Elegance Bath Products, Inc.(EBP) makes a variety of ceramic sinks and tubs.EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic.The sinks sell for $150 each and have variable costs of $80.The tubs sell for $600 and have variable costs of $450.The glass and ceramic sinks and tubs require the use of specialized molding equipment.The specialized molding equipment has 4,050 hours of capacity per year.A sink uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time  
- 
What is the contribution margin per hour of specialized molding time for tubs?

Accepted Answer

A)  $35 
B)  $68.33 
C)  $70 
D)  $200 
E)  $30 
A)  $35 
B)  $68.33 
C)  $70 
D)  $200 
E)  $30

Question 17

The following information relates to a product produced by Creamer Company: 
 
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.
If the firm produces the special order, the effect on income would be a

Accepted Answer

A)  $360,000 increase. 
B)  $360,000 decrease. 
C)  $540,000 increase. 
D)  $540,000 decrease. 
A)  $360,000 increase. 
B)  $360,000 decrease. 
C)  $540,000 increase. 
D)  $540,000 decrease.

Question 18

Victor's Detailing customers would be willing to pay $57 per detail.The company requires a 40% profit on each job.The average job would cost $30. 
-Victor's Detailing uses target-costing.What is the price they should quote a new customer?

Accepted Answer

A)  $30 
B)  $24 
C)  $57 
D)  $54 
E)  $84 
A)  $30 
B)  $24 
C)  $57 
D)  $54 
E)  $84

Question 19

Kerrigan Lumber Yard receives 12,000 large trees each year that they process into rough logs.Currently, Kerrigan sells the rough logs for $75 each.Kerrigan is considering processing the logs further into refined lumber.Each log can be processed into 200 feet of refined lumber at an additional cost of $0.40 per foot.The refined lumber can be sold for $0.95 per foot.  
Should Kerrigan process the rough logs into refined lumber?

Accepted Answer

A)  Yes, income will increase by $35 per log. 
B)  Yes, income will increase by $110 per log. 
C)  Yes, income will increase by $75 per log. 
D)  No, income will decrease by $35 per log. 
E)  No, income will decrease by $110 per log. 
A)  Yes, income will increase by $35 per log. 
B)  Yes, income will increase by $110 per log. 
C)  Yes, income will increase by $75 per log. 
D)  No, income will decrease by $35 per log. 
E)  No, income will decrease by $110 per log.

Question 20

Consider the following portion of a segmented income statement for the year just ended.Assume fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.  
  What is X's divisional segment margin?

Accepted Answer

A)  ($10,000) 
B)  $40,000 
C)  $10,000 
D)  $100,000 
A)  ($10,000) 
B)  $40,000 
C)  $10,000 
D)  $100,000

Matching Match each statement with the correct item below. -Special-order decisions

The operations of Smits Corporation are divided into the Child Division and the Jackson Division.Projections for the next year are as follows: Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be

Which of the following decisions focuses on whether or not to perform further actions on joint products?

Which of the following is used to calculate the segment margin?

Victor's Detailing customers would be willing to pay $57 per detail.The company requires an 80% markup on each job.The average job would cost $30. Victor's Detailing uses markup pricing to set the price on each job.What is the price Victor should quote a new customer?

A choice between internal and external production is a keep-or-drop decision.

Begonia uses part 87A in the production of color printers.Unit manufacturing costs for part 87A are: Begonia uses 130,000 units of 87A per year.Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18.Fixed overhead is unavoidable. Should Begonia make or buy the part?

The markup includes desired profit and any costs not included in the base cost.

In the presence of multiple constraints the solution is considerably more complex than for one constraint and requires a technique known as ____________________.

Victor's Detailing customers would be willing to pay $57 per detail.The company requires a 40% profit on each job.The average job would cost $30. -Victor's Detailing uses target-costing.What is the price they should quote a new customer?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior, Cost Forecasting, and Segmented Income Statements

Job-Order Costing and Normal Cost Overhead Application

Activity-Based Costing and Management

Process Costing

Cost-Volume-Profit Analysis

Profit Planning and Flexible Budgets

Standard Costing and Variance Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Emerging Topics in Managerial Accounting: Sustainability, Quality Cost, Lean Accounting, International Issues, Enterprise Risk Management, the Managerial Accountant in Forensicfraud Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 8: Tactical Decision-Making and Relevant Costing

Matching ​ Match each statement with the correct item below. -​Special-order decisions

The operations of Smits Corporation are divided into the Child Division and the Jackson Division.Projections for the next year are as follows: Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be

Which of the following decisions focuses on whether or not to perform further actions on joint products?

Which of the following is used to calculate the segment margin?

Victor's Detailing customers would be willing to pay $57 per detail.The company requires an 80% markup on each job.The average job would cost $30. Victor's Detailing uses markup pricing to set the price on each job.What is the price Victor should quote a new customer?

A choice between internal and external production is a keep-or-drop decision.

Begonia uses part 87A in the production of color printers.Unit manufacturing costs for part 87A are: Begonia uses 130,000 units of 87A per year.Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18.Fixed overhead is unavoidable. Should Begonia make or buy the part?

The markup includes desired profit and any costs not included in the base cost.

In the presence of multiple constraints the solution is considerably more complex than for one constraint and requires a technique known as ____________________.

Victor's Detailing customers would be willing to pay $57 per detail.The company requires a 40% profit on each job.The average job would cost $30. -Victor's Detailing uses target-costing.What is the price they should quote a new customer?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior, Cost Forecasting, and Segmented Income Statements

Job-Order Costing and Normal Cost Overhead Application

Activity-Based Costing and Management

Process Costing

Cost-Volume-Profit Analysis

Profit Planning and Flexible Budgets

Standard Costing and Variance Analysis

Performance Evaluation and Decentralization

Capital Investment Decisions

Emerging Topics in Managerial Accounting: Sustainability, Quality Cost, Lean Accounting, International Issues, Enterprise Risk Management, the Managerial Accountant in Forensicfraud Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters

Matching Match each statement with the correct item below. -Special-order decisions