Question 1

ABC Company has three products that use common facilities.The relevant data concerning these three products follows:

Fixed costs are allocated common costs.If product line C is dropped,what will be the impact on operating profits?

Accepted Answer

A) Operating loss will decrease to ($15,000). 
B) Operating loss will decrease to ($5,000). 
C) Operating loss will increase to ($35,000). 
D) There would be no change in operating profits.

Question 2

Differential analysis focuses mostly on which of the following?

Accepted Answer

A) opportunity costs 
B) cash outflows only. 
C) both cash inflows and outflows. 
D) accrual accounting.

Question 3

Just-in-time

Accepted Answer

A) requires the acquisition of new tracking software. 
B) has the objective to eliminate all non-value-added activities and reduce costs. 
C) seeks to increase inventory levels to prevent stock-outs. 
D) All of the answers are correct.

Question 4

The theory of constraints focuses on revenue and cost management when dealing with bottlenecks.The objective is to do the following
Throughput
Contribution Investments

Accepted Answer

A) increase minimize 
B) increase maximize 
C) decrease minimize 
D) decrease maximize

Question 5

Which of the following is false about short-run and long-run pricing decisions?

Accepted Answer

A) Short-run decisions include pricing for a special order with no long-term implications. 
B) Short-run decisions typically have a time horizon of six months or less. 
C) Long-run decisions include pricing a main product in a major market. 
D) Long-run decisions include pricing for a special order with no short-term implications.

Question 6

The total of all the costs incurred by the activities in the value chain are

Accepted Answer

A) variable costs. 
B) fixed costs. 
C) total costs. 
D) full costs.

Question 7

What are the costs of producing joint products and the relevant costs for decisions to sell or process further?

Accepted Answer

The answer of What are the costs of producing joint...

Question 8

When can a firm justify the use of full costs for pricing decisions?

Accepted Answer

A) when a firm enters into a short term contractual relationship to supply a product. 
B) for development and production of standardized products. 
C) when managers initially set prices to cover full costs plus a profit then adjust to reflect market conditions. 
D) because they are required by generally accepted accounting principles.

Question 9

Ben's Foods has two sales offices: North and South.The company's records report the following information

Management is considering dropping the North office.What will happen to operating income if North is eliminated?

Accepted Answer

A) Profit of $10,000 
B) Profit of $5,000 
C) Loss of $15,000 
D) Company would be at break-even.

Question 10

Clear Sailing Lifeboats
Clear Sailing Lifeboats uses 12,000 units of a certain component in production each year.Presently,this component is purchased from an outside supplier at $9.50 per unit.For some time now there has been idle capacity in the factory that could be utilized to make this component.The costs associated with manufacturing the component internally rather than buying it from the outside supplier are

Refer to Clear Sailing Lifeboats.Assuming other things stay the same,at what price per unit from the outside supplier would the company be indifferent (on economic grounds)to buying or making the components?

Accepted Answer

A) $9.50 
B) $9.00 
C) $8.50 
D) $8.00

Question 11

The objective of the theory of constraints is to increase throughput contribution (sales dollars minus direct materials costs),minimize investments,and manage production by

Accepted Answer

A) letting the bottleneck set the pace for the rest of operations. 
B) hiring more direct labor. 
C) increasing distribution channels. 
D) increasing production facilities.

Question 12

Which of the following is an objective of inventory management?

Accepted Answer

A) minimize the sum of ordering and carrying costs. 
B) minimize ordering costs and maximize carrying costs. 
C) maximize the sum of ordering and carrying costs. 
D) maximize the ordering costs and minimize carrying costs.

Question 13

Which of the following is true about short-run and long-run pricing decisions?

Accepted Answer

A) Short-run decisions include pricing for a special order with no long-term implications. 
B) Short-run decisions typically have a time horizon of six months or less. 
C) Long-run decisions include pricing a main product in a major market. 
D) All of the answers are correct.

Question 14

A cost that changes as a result of changing activitiesor levels of activities is called which of the following?

Accepted Answer

A) product cost. 
B) department cost. 
C) batch cost. 
D) differential cost.

Question 15

Inventory management.Here are facts about inventory costs for Tops Shoes,a retailer:
  
Required:
Prepare a table like Exhibit 7.14 in the text.Find the costs of ordering and carrying inventory for each of the following number of annual orders: 40 orders,50 orders,60 orders.
(Tops Shoes;inventory management. )

Accepted Answer

The answer of Inventory management.Here are facts about inventory costs...

Question 16

During the joint production process,the costs incurred after the splitoff point are called

Accepted Answer

A) additional processing costs. 
B) standard processing costs. 
C) fixed processing costs. 
D) normal processing costs.

Question 17

Which focuses on increasing the excess of differential revenue over differential costs when the firm faces bottlenecks?

Accepted Answer

A) Differential income analysis 
B) Throughput analysis 
C) Theory of bottlenecks 
D) Theory of constraints

Question 18

Under United States laws,dumping occurs when

Accepted Answer

A) when a business deliberately prices below its costs in an effort to drive out competitors. 
B) when a business unintentionally prices below its costs which results in driving out competitors. 
C) when a foreign company sells a product in the United States at a price below the market value in the country of its creation,and this action materially injuries (or threatens to materially injure)an industry in the United States. 
D) when a U.S.company sells a product in a foreign country at a price below the market value in the U.S. ,and this action materially injuries (or threatens to materially injure)an industry in the foreign country.

Question 19

Just-in-time systems enable accountants to spend

Accepted Answer

A) more time on inventory valuation for external reporting and less time obtaining data for managerial decisions. 
B) less time on inventory valuation for external reporting and more time obtaining data for managerial decisions. 
C) no time on inventory valuation for external reporting and more time obtaining data for managerial decisions. 
D) less time on inventory valuation for external reporting and no time obtaining data for managerial decisions.

Question 20

Explain the term incremental cost.Compare and contrast incremental cost to the term variable cost.

Accepted Answer

The answer of Explain the term incremental cost.Compare and contrast...

Exam 7: Differential Cost Analysis for Operating Decisions

ABC Company has three products that use common facilities.The relevant data concerning these three products follows: Fixed costs are allocated common costs.If product line C is dropped,what will be the impact on operating profits?