Question 1

Smith Company is conducting a sales mix analysis.The second step in this analysis involves which of the following formulas?

Accepted Answer

A) Contribution Margin per Unit = Selling Price per Unit - Variable Costs per Unit 
B) Contribution Margin per Unit = Selling Price per Unit - Fixed Costs per Unit 
C) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ¸ Quantity of the Constrained Resource Required per Unit 
D) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ´ Quantity of the Constrained Resource Required per Unit 
A) Contribution Margin per Unit = Selling Price per Unit - Variable Costs per Unit 
B) Contribution Margin per Unit = Selling Price per Unit - Fixed Costs per Unit 
C) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ¸ Quantity of the Constrained Resource Required per Unit 
D) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ´ Quantity of the Constrained Resource Required per Unit

Question 2

A special order should be accepted only if it maximizes operating income.

Accepted Answer

A) True 
 B)False

Question 3

Costs that vary among alternatives are irrelevant for decision making.

Accepted Answer

A) True 
 B)False

Question 4

What information does a manager need to gather for a make-or-buy decision?

Accepted Answer

Managers need to gather the variable cos

Question 5

Why is the book value of equipment irrelevant when considering the replacement of equipment?

Accepted Answer

Book value of the equipment is

Question 6

Conducting post completion audits to determine if short-run outcomes were achieved falls under the evaluation stage of the management process.

Accepted Answer

A) True 
 B)False

Question 7

Cooper Co.makes and uses 5,000 components each year in its manufacturing operations.An outside supplier has offered to supply the components to Anderson at $66 per unit.Anderson's production costs are as follows:  If Cooper accepts the order,$8 of fixed overhead per unit will be eliminated.
-If Cooper accepts the order,$8 of fixed overhead per unit will be eliminated.
If the offer is accepted,operating income will

Accepted Answer

A) increase by $100,000. 
B) decrease by $70,000. 
C) decrease by $30,000. 
D) increase by $60,000. 
A) increase by $100,000. 
B) decrease by $70,000. 
C) decrease by $30,000. 
D) increase by $60,000.

Question 8

"Variable costs are relevant and fixed costs are irrelevant." Explain why you agree or disagree with this statement.

Accepted Answer

The statement is not true.Costs are clas

Question 9

Smith Company is conducting a sales mix analysis.The first step in this analysis involves which of the following formulas?

Accepted Answer

A) Contribution Margin per Unit = Selling Price per Unit - Variable Costs per Unit 
B) Contribution Margin per Unit = Selling Price per Unit - Fixed Costs per Unit 
C) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ¸ Quantity of the Constrained Resource Required per Unit 
D) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ´ Quantity of the Constrained Resource Required per Unit 
A) Contribution Margin per Unit = Selling Price per Unit - Variable Costs per Unit 
B) Contribution Margin per Unit = Selling Price per Unit - Fixed Costs per Unit 
C) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ¸ Quantity of the Constrained Resource Required per Unit 
D) Contribution Margin per Unit of Constrained Resources = Contribution Margin per Unit ´ Quantity of the Constrained Resource Required per Unit

Question 10

If the incremental revenues are greater than the incremental costs,the product should be processed further.

Accepted Answer

A) True 
 B)False

Question 11

Information that is the same for all alternatives is considered relevant to the decision process.

Accepted Answer

A) True 
 B)False

Question 12

A segment margin is a segment's sales revenue minus its direct variable costs and direct fixed costs traceable to the segment.

Accepted Answer

A) True 
 B)False

Question 13

Elizabeth Pharmaceutical produces several medicines.Each product can be sold at the split-off point or processed further.The following results apply to March:   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) $84,000. 
B) $58,500. 
C) $77,000. 
D) $65,500. 
A) $84,000. 
B) $58,500. 
C) $77,000. 
D) $65,500.

Question 14

Examples of relevant fixed costs for a special order decision are the purchase of additional machinery,an increase in supervisory help,and an increase in insurance premiums required by a specific order.

Accepted Answer

A) True 
 B)False

Question 15

Irrelevant costs

Accepted Answer

A) do not differ among alternatives. 
B) can be avoided by a business. 
C) are the same as opportunity costs. 
D) are costs that will be incurred in the future. 
A) do not differ among alternatives. 
B) can be avoided by a business. 
C) are the same as opportunity costs. 
D) are costs that will be incurred in the future.

Question 16

In choosing among alternatives,managers are guided by historical cost information.

Accepted Answer

A) True 
 B)False

Question 17

The Nick Lumber Company is in the process of deciding whether to sell or process further rough-sawn lumber.The joint cost of producing the rough-sawn lumber is $10,500.The following data are available:
  
a.What is the incremental effect,increase or (decrease),on operating income of processing each type of lumber further?
b.Which type of lumber should be processed further?

Accepted Answer

a.
@#IMG-DLM& 
b.Lumber Type A and B sho

Question 18

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 Wood 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 19

The normal selling price of Daniel Company's product is $35 per unit.The costs of production are: direct materials,$6;direct labor,$5;variable overhead,$5;and fixed overhead,$6 (based on normal capacity).The company has received a special order for 12,800 units at a unit sales price of $19.There is ample unused capacity to fill the order and $2 per unit will be incurred for additional packaging.If the order is accepted,operating income will

Accepted Answer

A) increase by $12,800. 
B) decrease by $38,400. 
C) increase by $38,400. 
D) decrease by $12,800. 
A) increase by $12,800. 
B) decrease by $38,400. 
C) increase by $38,400. 
D) decrease by $12,800.

Question 20

The common costs shared by two or more products before they are split off are called joint costs.

Accepted Answer

A) True 
 B)False

Exam 23: Short-Run Decision Analysis

Smith Company is conducting a sales mix analysis.The second step in this analysis involves which of the following formulas?

A special order should be accepted only if it maximizes operating income.

Costs that vary among alternatives are irrelevant for decision making.

What information does a manager need to gather for a make-or-buy decision?

Why is the book value of equipment irrelevant when considering the replacement of equipment?

Conducting post completion audits to determine if short-run outcomes were achieved falls under the evaluation stage of the management process.

"Variable costs are relevant and fixed costs are irrelevant." Explain why you agree or disagree with this statement.

Smith Company is conducting a sales mix analysis.The first step in this analysis involves which of the following formulas?

If the incremental revenues are greater than the incremental costs,the product should be processed further.

Information that is the same for all alternatives is considered relevant to the decision process.

A segment margin is a segment's sales revenue minus its direct variable costs and direct fixed costs traceable to the segment.

Examples of relevant fixed costs for a special order decision are the purchase of additional machinery,an increase in supervisory help,and an increase in insurance premiums required by a specific order.

Irrelevant costs

In choosing among alternatives,managers are guided by historical cost information.

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 Wood Cleaner?

The common costs shared by two or more products before they are split off are called joint costs.

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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