Question 1

The foregone benefit of choosing one alternative over another is measured by:

Accepted Answer

A) opportunity costs. 
B) activity-based costs. 
C) differential costs. 
D) capital costs. 
A) opportunity costs. 
B) activity-based costs. 
C) differential costs. 
D) capital costs.

Question 2

Costs that change across decision alternatives are:

Accepted Answer

A) accounting costs. 
B) activity-based costs. 
C) differential costs. 
D) capital costs. 
A) accounting costs. 
B) activity-based costs. 
C) differential costs. 
D) capital costs.

Question 3

A ________ is one that can be attributed to a specific segment of the business.

Accepted Answer

A) common fixed cost 
B) direct fixed cost 
C) variable fixed cost 
D) fixed variable cost 
A) common fixed cost 
B) direct fixed cost 
C) variable fixed cost 
D) fixed variable cost

Question 4

Clifford,Inc.currently manufactures 2,000 subcomponents in one of its factories.The current unit costs to produce the subcomponents are:   Due to a labor strike,Clifford is considering purchasing the subcomponents from an outside supplier for $250 per unit rather than paying the 10% increase in direct labor costs demanded by the union.Fixed overhead is not avoidable.If Clifford purchases the subcomponent from the outside supplier,how much will profit differ from what it would be if it manufactured the subcomponents with the increase in direct labor cost?

Accepted Answer

A) $30,000 less 
B) $20,000 less 
C) $10,000 less 
D) $20,000 more 
A) $30,000 less 
B) $20,000 less 
C) $10,000 less 
D) $20,000 more

Question 5

You wish to take an Excel course.You may enroll at one within your school or you may take a community class at the local library.You've gathered the following information to aid in your decision-making process.   Consider the transportation cost.At what point would you be indifferent between alternatives?

Accepted Answer

A) Transportation cost of $200 per class for the community course 
B) Transportation cost of $150 per class for the community course 
C) Transportation cost of $250 per class for the community course 
D) Transportation cost of $300 per class for the community course 
A) Transportation cost of $200 per class for the community course 
B) Transportation cost of $150 per class for the community course 
C) Transportation cost of $250 per class for the community course 
D) Transportation cost of $300 per class for the community course

Question 6

Ross has received a special order for 10,000 units of its product at a special price of $30.The product normally sells for $40 and has the following manufacturing costs:   Assume that Ross has sufficient capacity to fill the order.If Ross accepts the order,what effect will the order have on the company's short-term profit?

Accepted Answer

A) $40,000 decrease 
B) $180,000 increase 
C) $60,000 decrease 
D) $80,000 increase 
A) $40,000 decrease 
B) $180,000 increase 
C) $60,000 decrease 
D) $80,000 increase

Question 7

Mason has received a special order for 1,000 units of its product at a special price of $250.The product currently sells 18,000 units for $300 and has the following manufacturing costs:
   Assume that Mason has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a.If Mason accepts the order,what effect will the order have on the company's short-term profit?
For the next two questions,now assume that Mason has sufficient capacity to fill 500 units of the order without harming normal sales.
b.If Mason accepts the order and fills it completely,what effect will the order have on the company's short-term profit?
c.If Mason accepts the special order,what average price should Mason charge to make a $20,000 incremental profit?

Accepted Answer

a.$25,000 increase in profit = 1,000 × [

Question 8

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

Accepted Answer

A) Special-order 
B) Make-or-buy 
C) Continue or discontinue 
D) Sell-or-process further 
A) Special-order 
B) Make-or-buy 
C) Continue or discontinue 
D) Sell-or-process further

Question 9

Spring,Inc.manufactures two products.It currently has 1,000 hours of direct labor and 2,000 hours of machine time available per month.The table below lists the contribution margin,labor and machine time requirements,and demand for each product.   What is the total contribution margin if Spring,Inc.prioritizes production according to its limited resources?

Accepted Answer

A) $39,000 
B) $15,000 
C) $24,000 
D) $18,000 
A) $39,000 
B) $15,000 
C) $24,000 
D) $18,000

Question 10

It costs Glenwood,Inc.$70 per unit to manufacture 1,000 units per month of a product that it can sell for $100 each.Alternatively,Glenwood could process the units further into a more complex product,which would cost an additional $40 per unit.Glenwood could sell the more complex product for $145 each.How would processing the product further affect Glenwood's profit?

Accepted Answer

A) Profit would increase by $5,000. 
B) Profit would increase by $45,000. 
C) Profit would decrease by $5,000. 
D) Profit would decrease by $45,000. 
A) Profit would increase by $5,000. 
B) Profit would increase by $45,000. 
C) Profit would decrease by $5,000. 
D) Profit would decrease by $45,000.

Question 11

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

Accepted Answer

A) Identify the decision problem. 
B) Review the results of the decision-making process. 
C) Choose the appropriate hurdle rate. 
D) Evaluate the costs and benefits of the alternatives. 
A) Identify the decision problem. 
B) Review the results of the decision-making process. 
C) Choose the appropriate hurdle rate. 
D) Evaluate the costs and benefits of the alternatives.

Question 12

Avocado has received a special order for 2,000 units of its product at a special price.The product normally sells for $400 and has the following manufacturing costs:   Assume that Avocado has sufficient capacity to fill the order.What special order price should Avocado charge to make a $20,000 incremental profit?

Accepted Answer

A) $400 
B) $360 
C) $270 
D) $260 
A) $400 
B) $360 
C) $270 
D) $260

Question 13

Capitol has received a special order for 2,000 units of its product at a special price of $195.The product normally sells for $260 and has the following manufacturing costs:
   Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.
a.If Capital accepts the order,what effect will the order have on the company's short-term profit?
b.What minimum price should Capital charge to achieve a $65,000 incremental profit?
c.Now assume Capital is currently operating at full capacity and cannot fill the order without harming normal production and sales.If Capitol accepts the order,what effect will the order have on the company's short-term profit?

Accepted Answer

a.$52,000 increase in profit = 2,000 × [

Question 14

Which of the following costs is not relevant in a special-order decision?

Accepted Answer

A) Direct labor 
B) Direct materials 
C) Variable overhead 
D) Fixed overhead 
A) Direct labor 
B) Direct materials 
C) Variable overhead 
D) Fixed overhead

Question 15

You wish to take an Excel course.You may enroll at one within your school or you may take a community class at the local library.You've gathered the following information to aid in your decision-making process.   Pretend transportation (gas,mileage,and parking)cost $200 per class session at the library.If you consider solely the cost - including transportation - of each alternative,which would you choose?

Accepted Answer

A) Neither alternative 
B) College course 
C) Community course 
D) Both alternatives 
A) Neither alternative 
B) College course 
C) Community course 
D) Both alternatives

Question 16

Opportunity costs are not relevant when a company has idle capacity.

Accepted Answer

A) True 
 B)False

Question 17

If a company has idle capacity,it means it has reached the limit on its resources.

Accepted Answer

A) True 
 B)False

Question 18

Story Corp.produces three products,and currently has a shortage of machine hours since one of its two machines is down - only 460 hours are available this month.The selling price,costs,labor requirements,and demand of the three products are as follows:
   a.In what order should Story prioritize production of the products?
b.How many of each product should be sold while the machine is down to maximize profit?
c.What is the total contribution margin if Story prioritizes production according to its limited resources?

Accepted Answer

a.A,C,B : CM/hr is $2.50/1 = $2.50 for A

Question 19

Which of the following statements is false?

Accepted Answer

A) Sunk costs are never relevant. 
B) Sunk costs are costs that occurred in the past. 
C) To be relevant,a cost must be an opportunity cost. 
D) To be relevant,a cost must occur in the future. 
A) Sunk costs are never relevant. 
B) Sunk costs are costs that occurred in the past. 
C) To be relevant,a cost must be an opportunity cost. 
D) To be relevant,a cost must occur in the future.

Question 20

Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?

Accepted Answer

A) An instructor agrees to add an additional student to a class. 
B) An accountant with no extra time agrees to do an extra client's tax return during busy season. 
C) A manufacturing firm that rents assembly line space to a complementary company. 
D) A train company uses a last-minute app to fill empty seats and makes long-term pricing decisions based on average revenue. 
A) An instructor agrees to add an additional student to a class. 
B) An accountant with no extra time agrees to do an extra client's tax return during busy season. 
C) A manufacturing firm that rents assembly line space to a complementary company. 
D) A train company uses a last-minute app to fill empty seats and makes long-term pricing decisions based on average revenue.

The foregone benefit of choosing one alternative over another is measured by:

Costs that change across decision alternatives are:

A ________ is one that can be attributed to a specific segment of the business.

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

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

Which of the following costs is not relevant in a special-order decision?

Opportunity costs are not relevant when a company has idle capacity.

If a company has idle capacity,it means it has reached the limit on its resources.

Which of the following statements is false?

Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Cost-Volume-Profit Analysis

Budgetary Planning

Standard Costing and Variance Analysis

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 7: Incremental Analysis for Short-Term Decision Making

The foregone benefit of choosing one alternative over another is measured by:

Costs that change across decision alternatives are:

A ________ is one that can be attributed to a specific segment of the business.

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

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

Which of the following costs is not relevant in a special-order decision?

Opportunity costs are not relevant when a company has idle capacity.

If a company has idle capacity,it means it has reached the limit on its resources.

Which of the following statements is false?

Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Cost-Volume-Profit Analysis

Budgetary Planning

Standard Costing and Variance Analysis

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters