Exam 11: Decision Making and Relevant Information

Opportunity costs are not recorded in financial accounting systems because historical record keeping is limited to transactions involving alternatives that managers actually selected rather than alternatives that they rejected.

Which of the following is true of depreciation cost?

Zephram Corporation has a plant capacity of 200,000 units per month.Unit costs at capacity are: Current monthly sales are 190,000 units at $30.00 each.Q,Inc. ,has contacted Zephram Corporation about purchasing 2,500 units at $24.00 each.Current sales would not be affected by the one-time-only special order.What is Zephram's change in operating profits if the one-time-only special order is accepted?

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity - enough excess capacity to accept the order?

Explain the five-step decision process that managers can use to make decisions.

Compare and contrast the theory of constraints and activity based costing.Which is more useful in short-run and long-run management of costs?

A relevant cost is a cost that is a(n)________.

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

Managers are examining a possible replacement of a machine decision and generate the following numbers: Book value of old machine $1,00,000 Current disposal value of old machine $50,000 Loss on disposal of old machine $300,000 Cost of new machine $600,000 In performing an analysis and in attempt to answer the question,"should we replace the old machine",which of the following statements would be true

A restaurant is deciding whether it wants to update its image or not.It currently has a cozy appeal with an outdated decor that is still in good condition,menus and carpet that need to be replaced anyway,and loyal customers. Identify for the restaurant management a.those costs that are relevant to this decision, b.those costs that are not differential, c.and qualitative considerations.

Pat,a Pizzeria manager,replaced the convection oven just six months ago.Today,Turbo Ovens Manufacturing announced the availability of a new convection oven that cooks more quickly with lower operating expenses.Pat is considering the purchase of this faster,lower-operating cost convection oven to replace the existing one they recently purchased.Selected information about the two ovens is given below: Required: a.What costs are sunk? b.What costs are relevant? c.What are the net cash flows over the next 5 years assuming the Pizzeria purchases the new convection oven? d.What other items should Pat,as manager of the Pizzeria,consider when making this decision?

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

A segment has the following data: What will be the incremental effect on net income if this segment is eliminated,assuming the fixed costs will be allocated to profitable segments?

The theory of constraints (TOC)defines throughput margin as ________.

Differential revenue is the additional total revenue from an activity.

Feedback regarding previous actions may affect ________.

For make-or-buy decisions,a supplier's ability to maintain secrecy of intellectual property is considered a(n)________.

Crandle Manufacturers Inc.is approached by a potential new customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.The company has excess capacity.The following per unit data apply for sales to regular customers: What is the contribution margin per unit?

Past costs are also called sunk costs because they are unavoidable and cannot be changed no matter what action is taken.

Direct materials are $600,direct labor is $450,variable overhead costs are $650,and fixed overhead costs are $400.The cost of one unit is ________.