Question 1

Which of the following is NOT a step in the decision-making model?

Accepted Answer

A) Determine costs and benefits for both feasible and unfeasible alternatives. 
B) Identify alternatives. 
C) Consider qualitative factors. 
D) Total the relevant costs and benefits for each alternative. 
A) Determine costs and benefits for both feasible and unfeasible alternatives. 
B) Identify alternatives. 
C) Consider qualitative factors. 
D) Total the relevant costs and benefits for each alternative.

Question 2

Donder Milling Company purchases logs and mills them into various grades of lumber. During the sawing and planning process, a considerable amount of sawdust is generated. Currently, Donder sells the sawdust to a particle board manufacturer for $50 per truckload. Donder is considering processing the sawdust into particle board itself. One truckload of sawdust can be made into 20 sheets of particle board selling for $8 per sheet. Further processing costs are $7 per board.
-Refer to the Figure.Assume that the cost of logs falls by half.Should Donder sell the sawdust at split-off or process it further,and what is the effect on income?

Accepted Answer

A) Process further; the reduction in the cost of logs makes that option more profitable than it was before. 
B) Sell at split-off; the decrease in the cost of the logs makes that option more profitable than it was before. 
C) Sell at split-off; the reduction in the cost of the logs is irrelevant. 
D) Process further; the reduction in the cost of the logs will lower further processing costs. 
A) Process further; the reduction in the cost of logs makes that option more profitable than it was before. 
B) Sell at split-off; the decrease in the cost of the logs makes that option more profitable than it was before. 
C) Sell at split-off; the reduction in the cost of the logs is irrelevant. 
D) Process further; the reduction in the cost of the logs will lower further processing costs.

Question 3

In keep-or-drop decisions,both the segment's contribution margin and its segment margin are useful in evaluating the performance of the segment.

Accepted Answer

A) True 
 B)False

Question 4

Which resources can be purchased in the amount needed and at the time of use?

Accepted Answer

A) lumpy resources 
B) flexible resources 
C) committed resources 
D) product resources 
A) lumpy resources 
B) flexible resources 
C) committed resources 
D) product resources

Question 5

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.What is the amount of machine time for model P-4 in terms of a percentage of a machine hour?

Accepted Answer

A) 0.10 
B) 0.25 
C) 0.30 
D) 0.50 
A) 0.10 
B) 0.25 
C) 0.30 
D) 0.50

Question 6

Which of the following costs is NOT relevant to a decision to sell a product at split-off or process the product further and then sell the product?

Accepted Answer

A) joint costs allocated to the product 
B) the selling price of the product at split-off 
C) the additional processing costs after split-off 
D) the selling price of the product after further processing 
A) joint costs allocated to the product 
B) the selling price of the product at split-off 
C) the additional processing costs after split-off 
D) the selling price of the product after further processing

Question 7

RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?

Accepted Answer

A) The budgeted product cost is $20,000. 
B) $6,207 includes selling and administrative expense and profit. 
C) All costs pertaining to the job total $20,000. 
D) $6,207 includes fixed overhead, selling and administrative expense, and profit. 
A) The budgeted product cost is $20,000. 
B) $6,207 includes selling and administrative expense and profit. 
C) All costs pertaining to the job total $20,000. 
D) $6,207 includes fixed overhead, selling and administrative expense, and profit.

Question 8

Rose Manufacturing Company had the following unit costs: A one-time customer has offered to buy 2,000 units at a special price of $48 per unit.Assume that sufficient unused production capacity exists to produce the order and no regular customers will be affected by the order.How much additional profit (loss)will be generated by accepting the special order?
$\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labour } & 8 \
\text { Variable factory overhead } & 10 \
\text { Fixed factory overhead (allocated) } & 18
\end{array}$

Accepted Answer

A) a $84,000 loss 
B) a $24,000 loss 
C) a $12,000 profit 
D) a $96,000 profit 
A) a $84,000 loss 
B) a $24,000 loss 
C) a $12,000 profit 
D) a $96,000 profit

Question 9

The benefit sacrificed when one alternative is chosen over another is called opportunity cost.

Accepted Answer

A) True 
 B)False

Question 10

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.What is the contribution margin per unit of scarce resource (machine time)for Model K-3?

Accepted Answer

A) $6 
B) $12 
C) $14 
D) $24 
A) $6 
B) $12 
C) $14 
D) $24

Question 11

ProPrinters uses part 87A in the production of colour printers. Unit manufacturing costs of part 87A are as follows:
ProPrinters uses 100,000 units of 87A per year. Printers R Us has offered to sell ProPrinters 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. $\begin{array}{lr}
\text { Direct materials } & \$ 8 \
\text { Direct labour } & 2 \
\text { Variable overhead } & 1 \
\text { Fixed overhead } & 4
\end{array}$
-Refer to the Figure.Should ProPrinters make or buy the part,and what would be the financial consequence?

Accepted Answer

A) make the part because it will save $100,000 over buying it 
B) buy the part because it will save $100,000 over making it 
C) make the part because it will save $1,100,000 over buying it 
D) buy the part because it will save $1,100,000 over making it 
A) make the part because it will save $100,000 over buying it 
B) buy the part because it will save $100,000 over making it 
C) make the part because it will save $1,100,000 over buying it 
D) buy the part because it will save $1,100,000 over making it

Question 12

Which of the following is the greatest concern when managers are considering the optimal product mix?

Accepted Answer

A) maximizing revenue 
B) minimizing cost 
C) maximizing profit 
D) minimizing selling and administrative expense 
A) maximizing revenue 
B) minimizing cost 
C) maximizing profit 
D) minimizing selling and administrative expense

Question 13

Donder Milling Company purchases logs and mills them into various grades of lumber. During the sawing and planning process, a considerable amount of sawdust is generated. Currently, Donder sells the sawdust to a particle board manufacturer for $50 per truckload. Donder is considering processing the sawdust into particle board itself. One truckload of sawdust can be made into 20 sheets of particle board selling for $8 per sheet. Further processing costs are $7 per board.
-Refer to the Figure.Should Donder process the sawdust into particle board,and what would be the effect on income?

Accepted Answer

A) No, income will decrease by $50 per truckload of sawdust. 
B) No, income will decrease by $30 per truckload of sawdust. 
C) Yes, income will increase by $20 per truckload of sawdust. 
D) Yes, income will increase by $50 per truckload of sawdust. 
A) No, income will decrease by $50 per truckload of sawdust. 
B) No, income will decrease by $30 per truckload of sawdust. 
C) Yes, income will increase by $20 per truckload of sawdust. 
D) Yes, income will increase by $50 per truckload of sawdust.

Question 14

In making a short-run decision,all alternatives need to be considered,not only feasible ones.

Accepted Answer

A) True 
 B)False

Question 15

Bonder Company makes a variety of paper products.One product is printer paper,packaged 2,000 sheets to a box.One box normally sells for $30 A large bank offered to purchase 5,000 boxes at $26 per box.Costs per box are as follows: No variable marketing costs would be incurred on the order.The company is operating significantly below the maximum production capacity.No fixed costs are avoidable.Which of the following represents the solution?
$\begin{array}{lr}
\text { Direct materials } & \$ 128 \
\text { Direct labour } & 53 \
\text { Variable overhead } & 21 \
\text { Fixed overhead } & 65
\end{array}$

Accepted Answer

A) Do not accept the order because income will decrease by $35,000. 
B) Do not accept the order because income will decrease by $5,000. 
C) Accept the order because income will increase by $35,000. 
D) Accept the order because income will increase by $5,000. 
A) Do not accept the order because income will decrease by $35,000. 
B) Do not accept the order because income will decrease by $5,000. 
C) Accept the order because income will increase by $35,000. 
D) Accept the order because income will increase by $5,000.

Question 16

Gibb,Inc.has just designed a new product with a target cost of $54.Gibb requires new products to have a profit of 25%.What is the target price for the new product?

Accepted Answer

A) $13.50 
B) $54.00 
C) $64.00 
D) $72.00 
A) $13.50 
B) $54.00 
C) $64.00 
D) $72.00

Question 17

Match each statement with the correct item below.
-Decision model

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 18

Walbom Company produced 200 defective units last month at a unit manufacturing cost of $40.The defective units were discovered before leaving the plant.Walbom can sell them "as is" for $30 or can rework them at a cost of $25 and sell them at the regular price of $60.What is the total relevant cost of reworking the defective units?

Accepted Answer

A) $2,250 
B) $3,000 
C) $5,000 
D) $6,750 
A) $2,250 
B) $3,000 
C) $5,000 
D) $6,750

Question 19

Atlantic 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.What is the effect on income if Atlantic Industries 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 $30,000 increase 
B) a $30,000 decrease 
C) a $270,000 increase 
D) a $270,000 decrease 
A) a $30,000 increase 
B) a $30,000 decrease 
C) a $270,000 increase 
D) a $270,000 decrease

Question 20

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.
Suppose the firm produces the special order.What would be the effect on Creamer's annual income?
$\begin{array}{lr}
\text { Direct materials } & \$ 24 \
\text { Direct labour } & 15 \
\text { Variable overhead } & 30 \
\text { Fixed overhead } & 18 \
\text { Unit cost } & \$ 87
\end{array}$

Accepted Answer

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

Which of the following is NOT a step in the decision-making model?

In keep-or-drop decisions,both the segment's contribution margin and its segment margin are useful in evaluating the performance of the segment.

Which resources can be purchased in the amount needed and at the time of use?

Which of the following costs is NOT relevant to a decision to sell a product at split-off or process the product further and then sell the product?

RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?

The benefit sacrificed when one alternative is chosen over another is called opportunity cost.

Which of the following is the greatest concern when managers are considering the optimal product mix?

In making a short-run decision,all alternatives need to be considered,not only feasible ones.

Gibb,Inc.has just designed a new product with a target cost of $54.Gibb requires new products to have a profit of 25%.What is the target price for the new product?

Match each statement with the correct item below. -Decision model

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 is NOT a step in the decision-making model?

In keep-or-drop decisions,both the segment's contribution margin and its segment margin are useful in evaluating the performance of the segment.

Which resources can be purchased in the amount needed and at the time of use?

Which of the following costs is NOT relevant to a decision to sell a product at split-off or process the product further and then sell the product?

RJB Building routinely bids on construction jobs.RJB first determines the budgeted product cost of the job and then applies a markup of 45%.If a bid of $20,000 is submitted for a new job,which of the following statements applies?

The benefit sacrificed when one alternative is chosen over another is called opportunity cost.

Which of the following is the greatest concern when managers are considering the optimal product mix?

In making a short-run decision,all alternatives need to be considered,not only feasible ones.

Gibb,Inc.has just designed a new product with a target cost of $54.Gibb requires new products to have a profit of 25%.What is the target price for the new product?

Match each statement with the correct item below. -Decision model

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