Question 1

Which of the following costs are future costs that differ across alternatives?

Accepted Answer

A) opportunity costs 
B) sunk costs 
C) relevant costs 
D) variable costs 
A) opportunity costs 
B) sunk costs 
C) relevant costs 
D) variable costs

Question 2

Needle is a private laboratory that performs more than 100 different tests and analyses. Four tests require the use of a radiological counting machine that can supply 6,000 hours per year. Information on the four lab tests are as follows:
 $\begin{array}{lrrrr} 
& \text { Test A } & \text { Test B } & \text { Test C } & \text { Test D } \
\text { Charging rate } & \$ 50 & \$ 20 & \$ 80 & \$ 70 \
\text { Variable cost } & 10 & 10 & 60 & 30 \
\text { Machine hours } & 2 & 1 & 0.5 & 0.25
\end{array}$
-Refer to the Figure.What is the contribution margin per hour of machine time for Test B?

Accepted Answer

A) $10 
B) $20 
C) $40 
D) $100 
A) $10 
B) $20 
C) $40 
D) $100

Question 3

Needle is a private laboratory that performs more than 100 different tests and analyses. Four tests require the use of a radiological counting machine that can supply 6,000 hours per year. Information on the four lab tests are as follows:
 $\begin{array}{lrrrr} 
& \text { Test A } & \text { Test B } & \text { Test C } & \text { Test D } \
\text { Charging rate } & \$ 50 & \$ 20 & \$ 80 & \$ 70 \
\text { Variable cost } & 10 & 10 & 60 & 30 \
\text { Machine hours } & 2 & 1 & 0.5 & 0.25
\end{array}$
-Refer to the Figure.What is the contribution margin per unit of machine time for Test D?

Accepted Answer

A) $20 
B) $40 
C) $100 
D) $160 
A) $20 
B) $40 
C) $100 
D) $160

Question 4

A company is considering a special order for 2,000 units to be priced at $18.90 (the normal price would be $21.50).The order would require specialized materials costing $4.00 per unit.Direct labour and variable factory overhead would cost $2.15 per unit.Fixed factory overhead is $2.20 per unit.However,the company has excess capacity,and acceptance of the order would not raise total fixed factory overhead.The warehouse,however,would have to add capacity costing $2,600.Which of the following is relevant to the special order?

Accepted Answer

A) $2.20 fixed factory overhead per unit 
B) $2.60 per unit of revenue 
C) $18.90 selling price per unit of special order 
D) $21.50 normal selling price 
A) $2.20 fixed factory overhead per unit 
B) $2.60 per unit of revenue 
C) $18.90 selling price per unit of special order 
D) $21.50 normal selling price

Question 5

Western Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: 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?
$$\begin{array} { l r } 
\text { Direct materials } & \$ 75,000 \
\text { Direct labour } & 120,000 \
\text { Variable manufacturing overhead } & 45,000 \
\text { Fixed manufacturing overhead } & 60,000 \
\text { Total } & \$ 300,000
\end{array}$$

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 6

In short-run decision making,the alternative with the lowest overall cost is always chosen.

Accepted Answer

A) True 
 B)False

Question 7

Alpha Company produces two models of a component: Model K-3 and Model P-4. The unit contribution margin for Model K-3 is $6, and the unit contribution margin for Model P-4 is $14. Each model must spend time on a special machine. The firm owns two machines that together provide 4,000 hours of machine time per year. Model K-3 requires 15 minutes of machine time; Model P-4 requires 30 minutes of machine time.
-Refer to the Figure.Suppose Alpha Company can sell only 5,500 units of each model.How many units of Model P-4 should be produced?

Accepted Answer

A) 1,375 
B) 2,750 
C) 5,000 
D) 5,500 
A) 1,375 
B) 2,750 
C) 5,000 
D) 5,500

Question 8

Auden makes three types of vitamin supplements,all of which require the use of encapsulating machines that have a capacity of 10,000 hours.Information on the three types (per case)is as follows:
 $$\begin{array} { l r r r } 
& \text { Basic } & \text { Vita-Stress } & \text { Antioxidant+ } \
\text { Selling price } & \$ 100 & \$ 125 & \$ 160 \
\text { Variable cost } & 50 & 70 & 90 \
\text { Machine hours } & 0.4 & 0.50 & 0.8
\end{array}$$ A. What is the contribution margin per case for each type?
B. What is the contribution margin per hour of machine time for each type?
C. Based on your analysis in requirement B, if the company can sell all that it can make of all of the products, how many of each type should be sold to maximize total contribution margin?

Accepted Answer

The answer of Auden makes three types of vitamin supplements,all...

Question 9

Edison Company produces two types of piano legs, plain and fancy, which have unit contribution margins of $8 and $12, respectively. Each piano leg must spend time on a special machine. The firm owns four machines that together provide 10,000 hours of machine time per year. The plain leg requires 0.25 hours of machine time, and the fancy leg requires 0.5 hours of machine time.
-Refer to the Figure.What is the contribution margin per hour of machine time for a fancy leg?

Accepted Answer

A) $6 
B) $8 
C) $12 
D) $24 
A) $6 
B) $8 
C) $12 
D) $24

Question 10

Information about three joint products follows: The cost of the joint process is $140,000.Which of the joint products should be processed further?
$\begin{array}{l}&A&B&C\
\text { Anticipated production } & 12,000 \mathrm{~kg} & 8,000 \mathrm{~kg} & 7,000 \mathrm{~kg} \
\text { Selling price/kg at split-o ff } & \$ 16 & \$ 26 & \$ 48\
\text { Additional processing costs/kg after split-off }\\text { (all variable) } & \$ 8 & \$ 20 & \$ 20 \
\text { Selling price/kg after further processing } & \$ 20 & \$ 40 & \$ 70
\end{array}$

Accepted Answer

A) joint product A 
B) joint product B 
C) joint product C 
D) all joint products 
A) joint product A 
B) joint product B 
C) joint product C 
D) all joint products

Question 11

One Kings Lane Corporation manufactures a single product with the following unit costs for 10,000 units:

$\begin{array}{lr}
\text { Direct materials } & \$ 75 \
\text { Direct labour } & 40 \
\text { Factory overhead (40\% variable) } & 90 \
\text { Selling expenses (60\% variable) } & 30 \
\text { Administrative expenses (20\% variable) } & 15 \
\text { Total per unit } & \$ 225
\end{array}$ 
Recently,a company approached One Kings Lane Corporation about buying 2,000 units for $250.Currently,the models are sold to dealers for $450.One Kings Lane's capacity is sufficient to produce the extra 3,000 units.No additional selling expenses would be incurred on the special order.
Required:
A.	What is the profit earned by One Kings Lane on the original 10,000 units?
B.	Should One Kings Lane accept the special order if its goal is to maximize short-run profits? How much will income be affected?
C.	Determine the minimum price One Kings Lane would want to receive in order to increase profits by $7,500 on the special order.
D.	When making a special order decision, what qualitative aspects of the decision should One Kings Lane Corporation consider?

Accepted Answer

The answer of One Kings Lane Corporation manufactures a single...

Question 12

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 13

Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units: The company has the capacity to produce 30,000 units.The product regularly sells for $40.A wholesaler has offered to pay $32 a unit for 2,000 units.
Suppose the firm chooses to accept the special order and reject some regular sales.What would be the effect on Gundy's operating income?
$\begin{array}{lr}
\text { Direct materials } & \$ 4 \
\text { Direct labour } & 12 \
\text { Variable manufacturing overhead } & 6 \
\text { Fixed manufacturing overhead } & 8
\end{array}$

Accepted Answer

A) $0 
B) a $4,000 increase 
C) a $16,000 decrease 
D) a $20,000 increase 
A) $0 
B) a $4,000 increase 
C) a $16,000 decrease 
D) a $20,000 increase

Question 14

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 15

Target costing can be used most effectively in the design and development stage of the product life cycle.

Accepted Answer

A) True 
 B)False

Question 16

Home Hardware sets prices at cost plus 90% of cost.The cost of a cordless drill kit is $45.What price is charged by Home Hardware for the cordless drill kit?

Accepted Answer

A) $27.50 
B) $34.00 
C) $42.00 
D) $85.50 
A) $27.50 
B) $34.00 
C) $42.00 
D) $85.50

Question 17

The Tucker Company charges cost plus 30%.What is the price of an item with cost equal to $65?

Accepted Answer

A) $12.50 
B) $50.00 
C) $60.00 
D) $84.50 
A) $12.50 
B) $50.00 
C) $60.00 
D) $84.50

Question 18

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

Question 19

Demand and supply are on one side of the pricing equation.

Accepted Answer

A) True 
 B)False

Question 20

At split-off,the joint costs of production for joint products are NOT relevant to the sell-or-process-further decision.

Accepted Answer

A) True 
 B)False

Which of the following costs are future costs that differ across alternatives?

In short-run decision making,the alternative with the lowest overall cost is always chosen.

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?

Target costing can be used most effectively in the design and development stage of the product life cycle.

Home Hardware sets prices at cost plus 90% of cost.The cost of a cordless drill kit is $45.What price is charged by Home Hardware for the cordless drill kit?

The Tucker Company charges cost plus 30%.What is the price of an item with cost equal to $65?

Match each statement with the correct item below. -Constraints

Demand and supply are on one side of the pricing equation.

At split-off,the joint costs of production for joint products are NOT relevant to the sell-or-process-further decision.

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

Which of the following costs are future costs that differ across alternatives?

In short-run decision making,the alternative with the lowest overall cost is always chosen.

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?

Target costing can be used most effectively in the design and development stage of the product life cycle.

Home Hardware sets prices at cost plus 90% of cost.The cost of a cordless drill kit is $45.What price is charged by Home Hardware for the cordless drill kit?

The Tucker Company charges cost plus 30%.What is the price of an item with cost equal to $65?

Match each statement with the correct item below. -Constraints

Demand and supply are on one side of the pricing equation.

At split-off,the joint costs of production for joint products are NOT relevant to the sell-or-process-further decision.

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