Question 1

What costing method determines the cost of a product or service on the basis of the price that customers are willing to pay?

Accepted Answer

A) relevant costing 
B) differential costing 
C) target costing 
D) product costing 
A) relevant costing 
B) differential costing 
C) target costing 
D) product costing

Question 2

Short-run decision making only involves short-run decisions that have nothing to do with the firm's overall strategy.

Accepted Answer

A) True 
 B)False

Question 3

Why does a special-order decision frequently ignore fixed factory overhead?

Accepted Answer

Special order decisions are,by definitio

Question 4

Match each statement with the correct item below.
-Target costing

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 5

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.Assume that all of the fixed overhead is allocated and can NOT be avoided.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 6

Houser Corporation manufactures a part for its production cycle.The costs per unit for 5,000 units of this part are as follows: Kingston Company has offered to sell Houser Corporation 5,000 units of the part for $112 per unit.If Houser Corporation accepts Kingston Company's offer,total fixed costs will be reduced to $60,000.Which alternative is more desirable,and by what amount is it more desirable?
Alternative Amount
$$\begin{array} { l r } 
\text { Direct materials } & \$ 32 \
\text { Direct labour } & 40 \
\text { Variable overhead } & 16 \
\text { Fixed overhead } & 32 \
\text { Total } & \$ 120
\end{array}$$

Accepted Answer

A) Make $20,000 
B) Make $120,000 
C) Buy $40,000 
D) Buy $100,000 
A) Make $20,000 
B) Make $120,000 
C) Buy $40,000 
D) Buy $100,000

Question 7

Resources that are acquired in advance of usage are flexible resources.

Accepted Answer

A) True 
 B)False

Question 8

Victor's Detailing customers would be willing to pay $57 per detail. The average job would cost $30.
-Refer to the Figure.Assume Victor's Detailing uses target costing.The company requires a 40% profit on each job.Which of the following should Victor's Detailing do?

Accepted Answer

A) reduce the required percentage to stay in business 
B) ask customers to pay more 
C) sell services at the price customers are willing to pay 
D) find a way to reduce costs 
A) reduce the required percentage to stay in business 
B) ask customers to pay more 
C) sell services at the price customers are willing to pay 
D) find a way to reduce costs

Question 9

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 C?

Accepted Answer

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

What costing method determines the cost of a product or service on the basis of the price that customers are willing to pay?

Short-run decision making only involves short-run decisions that have nothing to do with the firm's overall strategy.

Why does a special-order decision frequently ignore fixed factory overhead?

Match each statement with the correct item below. -Target costing

Resources that are acquired in advance of usage are flexible resources.

Victor's Detailing customers would be willing to pay $57 per detail. The average job would cost $30. -Refer to the Figure.Assume Victor's Detailing uses target costing.The company requires a 40% profit on each job.Which of the following should Victor's Detailing do?

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 costing method determines the cost of a product or service on the basis of the price that customers are willing to pay?

Short-run decision making only involves short-run decisions that have nothing to do with the firm's overall strategy.

Why does a special-order decision frequently ignore fixed factory overhead?

Match each statement with the correct item below. -Target costing

Resources that are acquired in advance of usage are flexible resources.

Victor's Detailing customers would be willing to pay $57 per detail. The average job would cost $30. -Refer to the Figure.Assume Victor's Detailing uses target costing.The company requires a 40% profit on each job.Which of the following should Victor's Detailing do?

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