Question 1

The markup includes desired profit and any costs not included in the base cost.

Accepted Answer

A) True 
 B)False

Question 2

Curtis Company sets price equal to cost plus 50%. Recently, Curtis charged a customer a price of $150 for an item. What was the cost of the item to Curtis?

Accepted Answer

A)  $50 
B)  $75 
C)  $100 
D)  $40 
E)  $80

Question 3

Victor's Detailing customers would be willing to pay $57 per detail. The company requires an 80% markup on each job. The average job would cost $30. Victor's Detailing uses markup pricing to set the price on each job. What is the price Victor should quote a new customer?

Accepted Answer

A)  $30 
B)  $24 
C)  $54 
D)  $84 
E)  $240

Question 4

Figure 13-2. ColorPro uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are:
  ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 87A per year for $12. Fixed overhead is unavoidable.
-Refer to Figure 13-2. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part?

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 $107,000 over buying it. 
D)  Buy the part because it will save $107,000 over making it. 
E)  Make the part because it will save $10,000 over buying it.

Question 5

The following information pertains to Dodge Company's three products:  Assume that product C is discontinued and the extra space is rented for $300 per month. All other information remains the same as the original data. Annual profits will

Accepted Answer

A)  increase by $75. 
B)  decrease by $75. 
C)  increase by $525. 
D)  remain the same.

Question 6

Refer to Figure 13-5. What is the amount of machine time for model K-3 in terms of percent of a machine hour?

Accepted Answer

A)  10% 
B)  20% 
C)  25% 
D)  40% 
E)  50%

Question 7

Fuller Company makes frames. A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each. Normally, Fuller would charge $90 per frame for this type of order. Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the frames are working at Fuller. Their wages will be paid whether or not the special order is accepted. Fuller's policy is to avoid layoffs to the extent possible.
-Which of the following is a qualitative factor that Fuller would consider in making the decision to accept or reject the special order?

Accepted Answer

A)  cost of yarn and backing 
B)  cost of setup labor 
C)  the no-layoff policy 
D)  the use of machinery 
E)  the machining and electricity

Question 8

Information about three joint products follows:  The cost of the joint process is $60,000. Which of the joint products should be sold at split-off?

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  Both A and B.

Question 9

Segmented reports are helpful for managers to make _______________ decisions.

Accepted Answer

The answer of Segmented reports are helpful for managers to...

Question 10

A major advantage of markup pricing is that standard markups are easy to apply.

Accepted Answer

A) True 
 B)False

Question 11

A manager will make a __________________ when determining if a specially priced order should be accepted or rejected.

Accepted Answer

The answer of A manager will make a __________________ when...

Question 12

The difference between the summed costs of two alternatives in a decision is known as the __________________.

Accepted Answer

The answer of The difference between the summed costs of...

Question 13

Typically in a special-order decision, a customer wants to pay more than the usual price.

Accepted Answer

A) True 
 B)False

Question 14

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) determine 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)method of determining the cost of a product based on the price that customers are willing to pay
G)decisions involving a choice between internal and external production
H)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)determine whether a specially priced order should be accepted or rejected
L)determine whether it is more profitable to process a joint product further

Question 15

Salley Company makes pagers. Currently, Salley purchases 10,000 plastic housings per year from an outside company for $1 each. One of Salley's 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

Accepted Answer

The answer of Salley Company makes pagers. Currently, Salley purchases...

Question 16

Refer to Figure 13-3. Assuming that specialized molding equipment time is the only constrained resource, and that EBP can sell as many tubs and sinks as it can produce, how many sinks should be sold?

Accepted Answer

A)  2,050 
B)  2,025 
C)  0 
D)  4,050 
E)  810

Question 17

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

Accepted Answer

A)  define the problem 
B)  identify alternatives 
C)  consider qualitative factors 
D)  total relevant costs and benefits for each alternative 
E)  determine costs and benefits for both feasible and unfeasible alternatives

Question 18

Refer to Figure 13-5. Now suppose that Santorino Company can sell only 5,500 units of each model. How many units of Model K-3 should be produced?

Accepted Answer

A)  5,500 
B)  312 
C)  1,250 
D)  2,750 
E)  5,000

Question 19

A decision that involves potential further processing of joint products is which kind of decision?

Accepted Answer

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

Question 20

Target costing is a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay.

Accepted Answer

A) True 
 B)False

Exam 13: Short-Run Decision Making: Relevant Costing

The markup includes desired profit and any costs not included in the base cost.

Curtis Company sets price equal to cost plus 50%. Recently, Curtis charged a customer a price of $150 for an item. What was the cost of the item to Curtis?

Victor's Detailing customers would be willing to pay $57 per detail. The company requires an 80% markup on each job. The average job would cost $30. Victor's Detailing uses markup pricing to set the price on each job. What is the price Victor should quote a new customer?

The following information pertains to Dodge Company's three products: Assume that product C is discontinued and the extra space is rented for $300 per month. All other information remains the same as the original data. Annual profits will

Refer to Figure 13-5. What is the amount of machine time for model K-3 in terms of percent of a machine hour?

Information about three joint products follows: The cost of the joint process is $60,000. Which of the joint products should be sold at split-off?

Segmented reports are helpful for managers to make _______________ decisions.

A major advantage of markup pricing is that standard markups are easy to apply.

A manager will make a __________________ when determining if a specially priced order should be accepted or rejected.

The difference between the summed costs of two alternatives in a decision is known as the __________________.

Typically in a special-order decision, a customer wants to pay more than the usual price.

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

Refer to Figure 13-3. Assuming that specialized molding equipment time is the only constrained resource, and that EBP can sell as many tubs and sinks as it can produce, how many sinks should be sold?

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

Refer to Figure 13-5. Now suppose that Santorino Company can sell only 5,500 units of each model. How many units of Model K-3 should be produced?

A decision that involves potential further processing of joint products is which kind of decision?

Target costing is a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay.