Question 1

What is the term for the act of choosing among alternatives with an immediate or limited end in view?

Accepted Answer

A) assessing feasible alternatives 
B) strategic decision making 
C) constructing a decision model 
D) short-run decision making 
A) assessing feasible alternatives 
B) strategic decision making 
C) constructing a decision model 
D) short-run decision making

Question 2

Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit.

Accepted Answer

A) True 
 B)False

Question 3

Elegance Bath Products, Inc. (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable cost of $450. The glass and ceramic sinks and tubs require the use of specialized moulding equipment. The specialized moulding equipment has 4,050 hours of capacity per year. A sink uses an average of two hours of specialized moulding equipment time; a tub uses an average of five hours of specialized moulding equipment time.
-Refer to the Figure.What is the contribution margin per hour of specialized moulding time for tubs?

Accepted Answer

A) $30.00 
B) $35.00 
C) $68.33 
D) $70.00 
A) $30.00 
B) $35.00 
C) $68.33 
D) $70.00

Question 4

Sasha Company produced 50 defective units last month at a unit manufacturing cost of $40.The defective units were discovered before leaving the plant.Sasha 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.Which of the following is NOT relevant to the sell-or-rework decision?

Accepted Answer

A) $25 for rework 
B) $30 selling price of defective units 
C) $40 manufacturing cost 
D) $60 regular selling price 
A) $25 for rework 
B) $30 selling price of defective units 
C) $40 manufacturing cost 
D) $60 regular selling price

Question 5

Reggie Corporation manufactures a single product with the following unit costs for 1,000 units: Recently,a company approached Reggie Corporation about buying 100 units for $5,100 each.Currently,the models are sold to dealers for $7,800.Reggie Corporation's capacity is sufficient to produce the extra 100 units.No additional selling expenses would be incurred on the special order.
Suppose the special order is accepted.How much will income change?
$\begin{array}{lr}
\text { Direct materials } & \$ 2,400 \
\text { Direct labour } & 960 \
\text { Factory overhead (30\% variable) } & 1,800 \
\text { Selling expenses ( } 50 \% \text { variable) } & 900 \
\text { Administrative expenses (10\% variable) } & 840 \
\text { Total per unit } & \$ 6,900
\end{array}$

Accepted Answer

A) It will decrease by $180,000. 
B) It will not change. 
C) It will increase by $111,600. 
D) It will increase by $398,400. 
A) It will decrease by $180,000. 
B) It will not change. 
C) It will increase by $111,600. 
D) It will increase by $398,400.

Question 6

Aerotoy Company makes toy airplanes.One plane is an excellent replica of a 737,which sells for $5.Vacation Airlines wants to purchase 12,000 planes at $1.75 each to give to children who are flying unaccompanied.Costs per plane are as follows: No variable marketing costs would be incurred.The company is operating significantly below the maximum productive capacity.No fixed costs are avoidable.However,Vacation Airlines wants its own logo and colours on the planes.The cost of the decals is $0.01 per plane,and a special machine costing $1,500 would be required to affix the decals.After the order is complete,the machine would be scrapped.Which of the following represents the solution?
$\begin{array}{lr}
\text { Direct materials } & \$ 1.00 \
\text { Direct labour } & 0.50 \
\text { Variable overhead } & 0.10 \
\text { Fixed overhead } & 0.90
\end{array}$

Accepted Answer

A) Do not accept the order, because income will decrease by $1,500. 
B) Do not accept the order, because income will decrease by $180. 
C) Accept the order, because income will increase by $180. 
D) Accept the order, because income will increase by $300. 
A) Do not accept the order, because income will decrease by $1,500. 
B) Do not accept the order, because income will decrease by $180. 
C) Accept the order, because income will increase by $180. 
D) Accept the order, because income will increase by $300.

Question 7

Mason Company makes portable charges for cell phones.Currently,Mason purchases 10,000 plastic housings a year from an outside company for $1 each.One of Mason engineers suggested that the company make its plastic housings in-house.Estimated unit costs are as follows:
* Fixed overhead is $2,400 per year in equipment costs specifically traceable to the plastic housing line and $1,600 per year in general overhead costs to be allocated to this line.
 $\begin{array}{lr}
\text { Direct materials } & \$ 0.30 \
\text { Direct labour } & 0.20 \
\text { Variable overhead } & 0.15 \
\text { Fixed overhead* } & 0.40
\end{array}$ A. If Mason makes the housing in-house, will net income be higher or lower, and by how much?
B. What is the highest price per unit that Mason would pay an outside company for the housings?
C. Now assume that all of the fixed overhead is allocated fixed overhead and will not be
affected by making the product in-house or purchasing it. If Mason makes the housing inhouse, will net income be higher or lower, and by how much?

Accepted Answer

The answer of Mason Company makes portable charges for cell...

Question 8

What are the six steps of the decision-making model?

Accepted Answer

.Recognize and define the problem.
.Iden

Question 9

Tela Company makes a 3-in-1 product that combines a printer, fax machine, and copier for home use. Currently, Tela makes all components of the 3-in-1 machine in-house. An outside company has offered to supply one component, part number B48, for $8 each. Tela uses 15,000 of these components per year. Costs of B48 are as follows:
 $\begin{array}{lr}
\text { Direct materials } & \$ 4.00 \
\text { Direct labour } & 2.00 \
\text { Variable overhead } & 1.50 \
\text { Fixed overhead } & 3.00
\end{array}$
-Refer to the Figure.Suppose that 40% of the fixed overhead is avoidable if part B48 is NOT made by Tela.Should Tela purchase the part from the outside supplier,and what is the financial effect?

Accepted Answer

A) No, income will decrease by $10,500. 
B) No, income will decrease by $7,500. 
C) Yes, income will increase by $7,500. 
D) Yes, income will increase by $10,500. 
A) No, income will decrease by $10,500. 
B) No, income will decrease by $7,500. 
C) Yes, income will increase by $7,500. 
D) Yes, income will increase by $10,500.

Question 10

What kind of decision involves potentially converting crude oil into diesel fuel?

Accepted Answer

A) a relevant decision 
B) a make-or-buy decision 
C) a sell-or-process-further decision 
D) a special order decision 
A) a relevant decision 
B) a make-or-buy decision 
C) a sell-or-process-further decision 
D) a special order decision

Question 11

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 total contribution margin of the optimal mix of plain and fancy legs?

Accepted Answer

A) $240,000 
B) $280,000 
C) $320,000 
D) $480,000 
A) $240,000 
B) $280,000 
C) $320,000 
D) $480,000

Question 12

Tine Company makes carpets. A customer wants to place a special order for 1,000 carpets in navy blue with the company logo woven in the middle, to be priced at $30 each. Normally, Tine would charge $60 per carpet for this type of order. Tine figures that yarn and backing will cost $12 per carpet, variable overhead (machining, electricity) is $5 per carpet, direct labour is $10 per carpet, and one setup will be required at $800 per setup. The setup charge costs are 100% labour. Currently, the workers needed to set up and make the carpets are working at Tine. Their wages will be paid whether or not the special order is accepted. Tine's policy is to avoid layoffs to the extent possible.
-Refer to the Figure.If Tine accepts the special order,by how much will operating income increase or decrease?

Accepted Answer

A) $13,000 decrease 
B) $3,000 decrease 
C) $3,000 increase 
D) $13,000 increase 
A) $13,000 decrease 
B) $3,000 decrease 
C) $3,000 increase 
D) $13,000 increase

Question 13

Travers Company sets prices equal to cost plus 55%.Recently,Travers charged a customer a price of $60 for an item.What was the cost of the item to Travers?

Accepted Answer

A) $25.20 
B) $38.71 
C) $40.32 
D) $42.00 
A) $25.20 
B) $38.71 
C) $40.32 
D) $42.00

Question 14

Match each statement with the correct item below.
-Relevant costs

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 15

Match each statement with the correct item below.
-Markup

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 16

Berkman Company is considering the purchase of new equipment to replace one-year-old equipment that is not achieving the expected results.The following information is available: Which of these items is NOT relevant to this decision?
$$\begin{array} { l l } 
\text { Expected maintenance costs of new machine } & \$ 13,000 \text { per year } \
\text { Purchase price of existing machine } & \$ 160,000 \
\text { Expected cost savings of new machine } & \$ 30,000 \text { per year } \
\text { Expected maintenance costs of exi sting machine } & \$ 8,000 \text { per year } \
\text { Resale value of existing machine } & \$ 45,000
\end{array}$$

Accepted Answer

A) the expected maintenance costs of the new machine 
B) the purchase cost of the existing machine 
C) the expected maintenance costs of the existing machine 
D) the expected resale value of the existing machine 
A) the expected maintenance costs of the new machine 
B) the purchase cost of the existing machine 
C) the expected maintenance costs of the existing machine 
D) the expected resale value of the existing machine

Question 17

Future costs that differ across alternatives are irrelevant.

Accepted Answer

A) True 
 B)False

Question 18

Match each statement with the correct item below.
-Cost-based pricing

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

Match each statement with the correct item below.
-Split-off point

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 20

A manager needs to determine whether a product line (or segment)should continue or be eliminated.What kind of decision does the manager need to make?

Accepted Answer

A) a keep-or-drop decision 
B) a make-or-buy decision 
C) a sell-or-process-further decision 
D) a special-order decision 
A) a keep-or-drop decision 
B) a make-or-buy decision 
C) a sell-or-process-further decision 
D) a special-order decision

What is the term for the act of choosing among alternatives with an immediate or limited end in view?

Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit.

What are the six steps of the decision-making model?

What kind of decision involves potentially converting crude oil into diesel fuel?

Travers Company sets prices equal to cost plus 55%.Recently,Travers charged a customer a price of $60 for an item.What was the cost of the item to Travers?

Match each statement with the correct item below. -Relevant costs

Match each statement with the correct item below. -Markup

Future costs that differ across alternatives are irrelevant.

Match each statement with the correct item below. -Cost-based pricing

Match each statement with the correct item below. -Split-off point

A manager needs to determine whether a product line (or segment)should continue or be eliminated.What kind of decision does the manager need to make?

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

What is the term for the act of choosing among alternatives with an immediate or limited end in view?

Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit.

What are the six steps of the decision-making model?

What kind of decision involves potentially converting crude oil into diesel fuel?

Travers Company sets prices equal to cost plus 55%.Recently,Travers charged a customer a price of $60 for an item.What was the cost of the item to Travers?

Match each statement with the correct item below. -Relevant costs

Match each statement with the correct item below. -Markup

Future costs that differ across alternatives are irrelevant.

Match each statement with the correct item below. -Cost-based pricing

Match each statement with the correct item below. -Split-off point

A manager needs to determine whether a product line (or segment)should continue or be eliminated.What kind of decision does the manager need to make?

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