Question 1

Estimated future costs that differ between alternative courses of action are termed as __________ costs in management decision analysis.

Accepted Answer

A) sunk 
B) relevant 
C) absorption 
D) replacement 
A) sunk 
B) relevant 
C) absorption 
D) replacement B

Question 2

Sales commissions would be excluded from special order decision analysis because

Accepted Answer

A) the customer approached the company directly. 
B) they are fixed costs and therefore irrelevant. 
C) they are administrative expenses. 
D) they are relevant variable costs. 
A) the customer approached the company directly. 
B) they are fixed costs and therefore irrelevant. 
C) they are administrative expenses. 
D) they are relevant variable costs. A

Question 3

The term incremental cost refers to

Accepted Answer

A) the difference in total costs between alternatives. 
B) a cost that does not entail any dollar outlay but that is relevant to the decision-making process. 
C) the profit forgone by selecting one choice instead of another. 
D) a cost that constitutes expenses to be incurred even though there is no activity. 
A) the difference in total costs between alternatives. 
B) a cost that does not entail any dollar outlay but that is relevant to the decision-making process. 
C) the profit forgone by selecting one choice instead of another. 
D) a cost that constitutes expenses to be incurred even though there is no activity. A

Question 4

Joint costs are also referred to as common cost.

Accepted Answer

A) True 
 B)False

Question 5

Outsourcing can reduce operating costs of a company.

Accepted Answer

A) True 
 B)False

Question 6

Candidates for outsourcing would include

Accepted Answer

A) custodial services. 
B) payroll processing. 
C) information management. 
D) all of these choices. 
A) custodial services. 
B) payroll processing. 
C) information management. 
D) all of these choices.

Question 7

When resources like direct materials,labor,or time are scarce,the goal is to maximize the contribution margin per unit of scarce resource.

Accepted Answer

A) True 
 B)False

Question 8

The cost of a previously purchased machine is an example of a sunk cost.

Accepted Answer

A) True 
 B)False

Question 9

In a company,there is no limit on the availability of resources such as machine time and labor hours.

Accepted Answer

A) True 
 B)False

Question 10

Wizard Company produces several cleaning products.Each product can be sold at the split-off point or processed further.The company's accountant has compiled the information that follows:

-What is the operating income from further processing for Kitchen Cleaner?

Accepted Answer

A) $0.25. 
B) $0.50 
C) $0.75 
D) $1.00 
A) $0.25. 
B) $0.50 
C) $0.75 
D) $1.00

Question 11

Kayak Company has a limited number of machine hours available to make its products A,B,and C.Data for each are as follows:   Which product requires the most machine hours to produce?

Accepted Answer

A) Product A 
B) Product B 
C) Product C 
D) It is not possible to tell with the given information. 
A) Product A 
B) Product B 
C) Product C 
D) It is not possible to tell with the given information.

Question 12

A cost that changes between the alternatives is known as a differential cost.

Accepted Answer

A) True 
 B)False

Question 13

The fixed costs that are traceable to the segments are called common costs.

Accepted Answer

A) True 
 B)False

Question 14

California Chemical Co.produces several medicines.Each compound can be sold at the split-off point or processed further.The following results apply to May:   After determining which products should be sold at the split-off point and which should be processed further,the total revenue provided by these three products would be

Accepted Answer

A) $172,500. 
B) $199,000. 
C) $200,600. 
D) $212,500. 
A) $172,500. 
B) $199,000. 
C) $200,600. 
D) $212,500.

Question 15

Total costs and savings are examples of qualitative factors.

Accepted Answer

A) True 
 B)False

Question 16

When faced with a make-or-buy decision,managers need which item of information about making?

Accepted Answer

A) Variable costs of making the item 
B) Need for additional machinery 
C) Incremental fixed costs 
D) All of these choices 
A) Variable costs of making the item 
B) Need for additional machinery 
C) Incremental fixed costs 
D) All of these choices

Question 17

On November 25,2014,Marquez Golf Co.received a special order for 5,000 three-wood golf club sets.These golf clubs will be marketed in Japan.Ito Imports Inc. ,the purchasing company,wants the clubs bulk packaged and is willing to pay $55 per set for the clubs.The president of Marquez Golf Co.has gathered the following product costing information about the set of woods being discussed:
· Direct materials (wood),$600 per 100 sets
· Direct materials (metal shafts),$1,000 per 100 sets
· Direct materials (grips),$150 per 100 sets
· Direct labor is $20 per set
· Variable manufacturing costs are $12 per set
· Fixed manufacturing costs are 20 percent of direct labor dollars
· Variable selling expenses are $10 per set
· Variable shipping costs are $7 per set
· Fixed general and administrative costs are 30 percent of direct labor dollars
Bulk shipping costs will total $11,000,thus eliminating both variable selling and variable shipping costs from consideration.The company did not expect this order and will reach planned production capacity for the year.However,there is enough plant capacity for the special order.Round answers to two decimal places.
a.Prepare an analysis for the president to use in deciding whether to accept or reject the offer by Ito Imports Inc.What decision should be made?
b.What is the lowest possible price Marquez Golf Co.could charge per set of woods and still make a $9,000 profit on this order?

Accepted Answer

a.Decision analysis prepared:
@#IMG-DLM& 
Since th

Question 18

Managers should use only financial and quantitative information in the decision-making process.

Accepted Answer

A) True 
 B)False

Question 19

The fixed costs of existing facilities are usually included in the analysis for special order decisions.

Accepted Answer

A) True 
 B)False

Question 20

If a segment is dropped,remaining segments must have sufficient contribution margin to cover their own direct costs and the

Accepted Answer

A) avoidable costs. 
B) common costs. 
C) uncommon costs. 
D) none of these choices. 
A) avoidable costs. 
B) common costs. 
C) uncommon costs. 
D) none of these choices.

Exam 23: Short-Run Decision Analysis

Estimated future costs that differ between alternative courses of action are termed as __________ costs in management decision analysis.

Sales commissions would be excluded from special order decision analysis because

The term incremental cost refers to

Joint costs are also referred to as common cost.

Outsourcing can reduce operating costs of a company.

Candidates for outsourcing would include

When resources like direct materials,labor,or time are scarce,the goal is to maximize the contribution margin per unit of scarce resource.

The cost of a previously purchased machine is an example of a sunk cost.

In a company,there is no limit on the availability of resources such as machine time and labor hours.

Wizard Company produces several cleaning products.Each product can be sold at the split-off point or processed further.The company's accountant has compiled the information that follows: -What is the operating income from further processing for Kitchen Cleaner?

Kayak Company has a limited number of machine hours available to make its products A,B,and C.Data for each are as follows: Which product requires the most machine hours to produce?

A cost that changes between the alternatives is known as a differential cost.

The fixed costs that are traceable to the segments are called common costs.

Total costs and savings are examples of qualitative factors.

When faced with a make-or-buy decision,managers need which item of information about making?

Managers should use only financial and quantitative information in the decision-making process.

The fixed costs of existing facilities are usually included in the analysis for special order decisions.

If a segment is dropped,remaining segments must have sufficient contribution margin to cover their own direct costs and the

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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