Question 1

will not continue if an ongoing operation is changed or deleted.

Accepted Answer

A)  Avoidable costs 
B)  Sunk costs 
C)  Differential costs 
D)  Common costs 
A)  Avoidable costs 
B)  Sunk costs 
C)  Differential costs 
D)  Common costs

Question 2

is (are) not a factor in pricing decisions.

Accepted Answer

A)  Resource availability 
B)  Competitors' actions 
C)  Customer demands 
D)  Legal requirements 
A)  Resource availability 
B)  Competitors' actions 
C)  Customer demands 
D)  Legal requirements

Question 3

Why do most executives use both full- cost and variable- cost information for pricing decisions?

Accepted Answer

Executives usually use full co

Question 4

Marketing plays a limited role in target costing.

Accepted Answer

A) True 
 B)False

Question 5

The accountant's role in decision making involves collecting the relevant information.

Accepted Answer

A) True 
 B)False

Question 6

The only decision for a manager to make with perfect competition is how much to sell.

Accepted Answer

A) True 
 B)False

Question 7

Laguna Company operates a wine outlet in a tourist area. One- gallon bottles sell for $18. Daily fixed costs are
$4,500, and variable costs are $9 per gallon. An average of 750 gallons is sold each day. Laguna Company has a capacity of 800 gallons per day.
Required:
a. Determine the average cost per gallon.
b. A bus loaded with 40 senior citizens stops by at closing time and the tour director offers Laguna Company
$450 for 40 gallons. Laguna Company refuses, saying they would lose $3.75 on each gallon. Is Laguna Company correct about the $3.75? Why or why not?
c. A fund- raising organization has offered Laguna Company a one- year contract to buy 300 gallons a day for
$10.75 each. Should they accept the offer? Why or why not? $$\text { Answer a. Variable costs }( \$ 9 \times \quad \$ 6,750:750)$$
$\begin{array}{ll}
\text { Fixed costs } & \underline{4500} \
\text { T ot al costs } & \$ 11,250
\end{array}$ Average costs = $11,250 / 750 = $15
 $$\begin{array} { c r } 
\text { Average costs } & \$ 15.00 \
\text { Offer } ( \$ 450 / 40 ) & \underline { 11.25 } \
\text { Net loss } & \$ 3.75 \
\hline
\end{array}$$ b. Laguna Company is correct that it would lose $3.75. However, since it is the end of the day, and assuming it has capacity, it should accept the offer since it covers the variable cost. It would make a contribution of $2.25 ($11.25 - $9.00) per unit for a total of $90.
 c.
$\begin{array}{lc}
\text { Capacity } & 800 \
\text { Offer } & \underline{300} \
\text { Net to other customers } & 500 \
\text { Currentaverage } & \frac{750}{250} \
\text { Lost regular sales } & \underline{250}
\end{array}$
$\begin{array}{lr}
\text { Lost regular sales [250 } \times(\$ 18-\$ 9)] & \$ 2,250.00 \
\text { Offer [250 }(\$ 11.25-\$ 9)] & \underline{562.50}
\end{array}$

Accepted Answer

@#IMG-DLM& Laguna Company should not acc

Question 8

Martz Company has three departments. Data for the most recent year is presented below: $\begin{array}{llll}&C&A&T\
\text { Sales } & \$ 4,000 & \$ 1,920 & \$ 2,240 \
\text { Variable expenses } & 3,280 & 1,420 & 520 \
\text { Fixed expenses: } & & & \
\text { Unavoidable } & 480 & 180 & 440 \
\text { Avoidable } & 555 & 265 & 360\\text { Operating income (loss)}&(315)&55&920
\end{array}$ Martz Company is considering eliminating department C because it has a loss. Required:
a. Compute the change in operating income if Martz Company eliminates Department C and does not replace it.
b. Compute the change in operating income if Martz Company replaces Department C with a second Department T. This will double the sales of Department T without increasing fixed cost.

Accepted Answer

a. Operating income will decre

Question 9

are costs that continue even if an operation is halted.

Accepted Answer

A)  Common costs 
B)  Unavoidable costs 
C)  Variable costs 
D)  Sunk costs 
A)  Common costs 
B)  Unavoidable costs 
C)  Variable costs 
D)  Sunk costs

Question 10

Qualitative aspects of information are those for which measures in dollars and cents is easy and precise.

Accepted Answer

A) True 
 B)False

Question 11

If perfectly accurate and relevant information is not available for decision making, the accountant should consider using information that is:

Accepted Answer

A)  imprecise but relevant 
B)  precise but irrelevant 
C)  imprecise but irrelevant 
D)  All of these answers are correct. 
A)  imprecise but relevant 
B)  precise but irrelevant 
C)  imprecise but irrelevant 
D)  All of these answers are correct.

Question 12

Kaizen costing is the process of continuous improvement during the manufacturing process.

Accepted Answer

A) True 
 B)False

Question 13

Zippee Industries budgeted the following costs for the production of its one and only product, tennis balls, for the next fiscal year: $$\begin{array} { l c } 
\text { Materials } & \$ 35,000 \
\text { Labor } & 25,000 \
\text { Overhead: } & \
\text { Variable } & 30,000 \
\text { Fixed } & 15,000 \
\text { Selling and administrative: } \
\text { Variable } & 7,500 \
\text { Fixed } & \underline { 12,500 } \
\text { Total costs } & \underline { \$ 125,000 }
\end{array}$$ Zippee Industries has a target profit of $30,000. The average target markup for setting prices as a percentage of total production costs would be:

Accepted Answer

A)  68% 
B)  158% 
C)  32% 
D)  48% 
A)  68% 
B)  158% 
C)  32% 
D)  48%

Question 14

Riverside Industries has three product lines, A, B, and C. The following information is available: $$\begin{array} { l l l l } 
& \underline { \mathrm { A } } & \underline { \mathrm { B } } & \underline { \mathrm { C } } \
\text { Sales } & \$ 100,000 & \$ 90,000 & \$ 44,000 \
\text { Variable costs } & 76,000 & 48,000 & 35,000 \
\text { Contribution } & \$ 24,000 & \$ 42,000 & \$ 9,000 \
\text { margin } & & & \
\text { Fixed costs: } & & & \
\text { Avoidable } & 9,000 & 18,000 & 3,000 \
\text { Unavoidable } & \underline { 6,000 } & \underline { 9,000 } & \underline { 7,700 } \
\text { Op erating inc ome } & \underline { \$ 9,000 } & \$ 15,000 & (\$ 1,700 )
\end{array}$$ Riverside Industries is thinking of dropping product line C because it is reporting a loss. Assuming Riverside drops line C and does not replace it, the operating income will:

Accepted Answer

A)  increase by $600 
B)  decrease by $6,000 
C)  increase by $2,400 
D)  decrease by $9,000 
A)  increase by $600 
B)  decrease by $6,000 
C)  increase by $2,400 
D)  decrease by $9,000

Question 15

As long as marginal cost is less than the sales price, additional production and sales are profitable.

Accepted Answer

A) True 
 B)False

Question 16

In deciding whether to add or delete a product, service, or department, the depreciation associated with the custom- built equipment used to produce the product is an:

Accepted Answer

A)  unavoidable variable cost 
B)  unavoidable fixed cost 
C)  avoidable variable cost 
D)  avoidable fixed cost 
A)  unavoidable variable cost 
B)  unavoidable fixed cost 
C)  avoidable variable cost 
D)  avoidable fixed cost

Question 17

The profit- maximizing volume is the quantity at which the difference between the sales price and marginal cost is at its greatest.

Accepted Answer

A) True 
 B)False

Question 18

Aspects of decision making for which measurement in dollars and cents is difficult and imprecise

Accepted Answer

The answer of Aspects of decision making for which measurement...

Question 19

The predicted future costs and revenues that will differ among alternative courses of action

Accepted Answer

Relevant i

Question 20

Savage Company produces and sells 35,000 units at $22 per unit. Savage Company's product cost is calculated as follows: $\begin{array} { l  }
 \text {Variable-unit-based costs }& \text {\$ 8 perunit } \
 \text {Fixed costs}& \text {\$ 2 perunit } \
 \text {Set-up costs  }& \text {\$ 3 perunit } \
& \text {\$ 13 per unit } \
\end{array}$
 A total of 500 set- ups at a cost of $120 per set- up are required to produce the 20,000 units. Savage Company has received a special order to sell 5,000 units at $12 per unit. Savage Company has excess capacity available, but these 5,000 would require 60 set- ups. If Savage Company accepts the special order, Savage Company's cost will increase by:

Accepted Answer

A)  $47,200 
B)  $7,200 
C)  $40,000 
D)  $65,000 
A)  $47,200 
B)  $7,200 
C)  $40,000 
D)  $65,000

will not continue if an ongoing operation is changed or deleted.

is (are) not a factor in pricing decisions.

Why do most executives use both full- cost and variable- cost information for pricing decisions?

Marketing plays a limited role in target costing.

The accountant's role in decision making involves collecting the relevant information.

The only decision for a manager to make with perfect competition is how much to sell.

are costs that continue even if an operation is halted.

Qualitative aspects of information are those for which measures in dollars and cents is easy and precise.

If perfectly accurate and relevant information is not available for decision making, the accountant should consider using information that is:

Kaizen costing is the process of continuous improvement during the manufacturing process.

As long as marginal cost is less than the sales price, additional production and sales are profitable.

In deciding whether to add or delete a product, service, or department, the depreciation associated with the custom- built equipment used to produce the product is an:

The profit- maximizing volume is the quantity at which the difference between the sales price and marginal cost is at its greatest.

Aspects of decision making for which measurement in dollars and cents is difficult and imprecise

The predicted future costs and revenues that will differ among alternative courses of action

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters

Exam 5: Relevant Information and Decision-Making: Marketing Decisions

will not continue if an ongoing operation is changed or deleted.

is (are) not a factor in pricing decisions.

Why do most executives use both full- cost and variable- cost information for pricing decisions?

Marketing plays a limited role in target costing.

The accountant's role in decision making involves collecting the relevant information.

The only decision for a manager to make with perfect competition is how much to sell.

are costs that continue even if an operation is halted.

Qualitative aspects of information are those for which measures in dollars and cents is easy and precise.

If perfectly accurate and relevant information is not available for decision making, the accountant should consider using information that is:

Kaizen costing is the process of continuous improvement during the manufacturing process.

As long as marginal cost is less than the sales price, additional production and sales are profitable.

In deciding whether to add or delete a product, service, or department, the depreciation associated with the custom- built equipment used to produce the product is an:

The profit- maximizing volume is the quantity at which the difference between the sales price and marginal cost is at its greatest.

Aspects of decision making for which measurement in dollars and cents is difficult and imprecise

The predicted future costs and revenues that will differ among alternative courses of action

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters