Question 1

Select the correct statement regarding relevant revenues.

Accepted Answer

A)  Relevant revenues must not differ among the alternatives being considered. 
B)  Past or future revenues may be relevant. 
C)  Relevant revenues must make a difference in the decision under consideration. 
D)  Revenues are not considered relevant in the same way as relevant costs. 
A)  Relevant revenues must not differ among the alternatives being considered. 
B)  Past or future revenues may be relevant. 
C)  Relevant revenues must make a difference in the decision under consideration. 
D)  Revenues are not considered relevant in the same way as relevant costs.

Question 2

Select the correct statement regarding opportunity costs.

Accepted Answer

A)  Opportunity costs need not be considered in decision making. 
B)  Opportunity costs are not recorded in a firm's financial accounting records. 
C)  Opportunity costs represent sunk costs. 
D)  All of these answers are correct. 
A)  Opportunity costs need not be considered in decision making. 
B)  Opportunity costs are not recorded in a firm's financial accounting records. 
C)  Opportunity costs represent sunk costs. 
D)  All of these answers are correct.

Question 3

Gibbs Corporation makes indoor gas fireplaces. A standard fireplace includes unit-level materials, labor, and overhead costs. In addition, the company incurs product-level engineering and advertising costs. Lastly, the company incurs facility-level costs related to renting the manufacturing building A sales representative has been in contact with a building developer who wants to buy 20 fireplaces only if he can buy them at amount lower than Gibbs's selling price. Which of the following costs would be relevant to this special order decision?

Accepted Answer

A)  The facility-level building rental costs 
B)  The product-level engineering and advertising costs 
C)  The unit-level materials, labor, and overhead 
D)  All of these answers are correct. 
A)  The facility-level building rental costs 
B)  The product-level engineering and advertising costs 
C)  The unit-level materials, labor, and overhead 
D)  All of these answers are correct.

Question 4

Max bought a ticket to the championship baseball game for $175. Someone approaches him outside the stadium and offers him $375 for his ticket. If Max decides to go to the game instead of selling his ticket, how much does it cost Max to go to the game?

Accepted Answer

A)  $200 
B)  $175 
C)  $375 
D)  None of the above. 
A)  $200 
B)  $175 
C)  $375 
D)  None of the above.

Question 5

Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below: $\begin{array}{lcc}
&\text { Eastern Tour}&\text { Western Tour }\
\text { Projected revenue } & \$ 14,000 & \$ 18,000 \
\text { Variable costs } & 2,000 & 10,000\
\text { Fixed costs } & \underline{6,000 }&\underline{ 6,000} \
\text { Profit } &\underline{ \$ 6,000} &\underline{ \$ 2,000}
\end{array}$
 What are the incremental (differential) costs of the Western Tour?

Accepted Answer

A)  $4,000. 
B)  $6,000. 
C)  $8,000. 
D)  None of these answers are correct. 
A)  $4,000. 
B)  $6,000. 
C)  $8,000. 
D)  None of these answers are correct.

Question 6

The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.

Accepted Answer

A) True 
 B)False

Question 7

Engineering design costs are generally referred to as:

Accepted Answer

A)  Batch-level costs. 
B)  Facility-level costs. 
C)  Unit-level costs. 
D)  Product-level costs. 
A)  Batch-level costs. 
B)  Facility-level costs. 
C)  Unit-level costs. 
D)  Product-level costs.

Question 8

Indicate whether each of the following statements is true or false.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 9

All of the following are examples of product-level costs except:

Accepted Answer

A)  product inspection costs. 
B)  property and real estate taxes costs. 
C)  engineering design costs. 
D)  patent costs. 
A)  product inspection costs. 
B)  property and real estate taxes costs. 
C)  engineering design costs. 
D)  patent costs.

Question 10

Outsourcing reduces the extent of a company's vertical integration.

Accepted Answer

A) True 
 B)False

Question 11

Select the term from the list provided that best matches each of the following descriptions. Put the number of the term in the column for Your Answer.

Accepted Answer

The answer of Select the term from the list provided...

Question 12

Which of the following is not a possible alternate term for costs that can be eliminated by taking a specified course of action?

Accepted Answer

A)  Avoidable costs 
B)  Opportunity costs 
C)  Relevant costs 
D)  Differential costs 
A)  Avoidable costs 
B)  Opportunity costs 
C)  Relevant costs 
D)  Differential costs

Question 13

Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs: $\begin{array}{llr}
  \text { Unlt-level materlal cost } &\$3\
 \text { Unit-level labor cost } &\$2\
 \text { Unit-level overhead } &\$1\
 \text { Batch-level set-up cost ( 5,000 units per batch) } &\$25,000\
 \text {Product-level supervisory salaries  } &\$37,500\
 \text { 
allocated facilitv-level costs } &\$20,000\
\end{array}$
 The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. If the company decides to make the parts, total costs will be:

Accepted Answer

A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased. 
A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased.

Question 14

Facility-level costs are not involved in decisions to eliminate a segment of a business.

Accepted Answer

A) True 
 B)False

Question 15

Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $24 each. The company is considering making the switches internally and has conducted a study to determine the costs involved. The costs below are projected annual production costs: $\begin{array}{llr}
  \text { Unlt-level materlal cost } &\$5\
 \text { Unit-level labor cost } &\$4\
 \text { Unit-level overhead } &\$2\
 \text { Batch-level set-up cost ( 7,000 units per batch) } &\$13,000\
 \text {Product-level supervisory salaries  } &\$41,500\
 \text { 
allocated facilitv-level costs } &\$28,000\
\end{array}$
 Assume that the company needs 14,000 of the switches, which would be produced in two batches. Assume also that the company will still be operating within the relevant range. If Safety decides to make the parts under these conditions, the total relevant costs will be:

Accepted Answer

A)  $263,500. 
B)  $222,500. 
C)  $250,500. 
D)  $235,500. 
A)  $263,500. 
B)  $222,500. 
C)  $250,500. 
D)  $235,500.

Question 16

Mountain Gear has been using the same machines to make its name-brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $250,000. The old machines presently have a book value of $125,000 and a market value of $17,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $150,000 and have operating expenses of $17,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $35,000 a year. The new machines are expected to increase quality, justifying a price increase and thereby increasing sales revenue by $15,000 a year. Select the true statement.

Accepted Answer

A)  The company will be $32,000 better off over the 5-year period if it replaces the old equipment. 
B)  The company will be $33,000 better off over the 5-year period if it replaces the old equipment. 
C)  The company will be $50,000 better off over the 5-year period if it keeps the old equipment. 
D)  The company will be $17,000 better off over the 5-year period if it replaces the old equipment. 
A)  The company will be $32,000 better off over the 5-year period if it replaces the old equipment. 
B)  The company will be $33,000 better off over the 5-year period if it replaces the old equipment. 
C)  The company will be $50,000 better off over the 5-year period if it keeps the old equipment. 
D)  The company will be $17,000 better off over the 5-year period if it replaces the old equipment.

Question 17

The Mighty Music Company produces and sells a desktop speaker for $320. The company has the capacity to produce 72,000 speakers each period. At capacity, the costs assigned to each unit are as follows: $$\begin{array} { l c } 
\text { Unit level costs } & \$ 155 \
\text { Product level costs } & \$ 37 \
\text { Facility level costs } & \$ 27
\end{array}$$ The company has received a special order for 23,000 speakers. If this order is accepted, the company will have to spend $32,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Accepted Answer

A)  $206.39 
B)  $163.89 
C)  $156.39 
D)  $166.89 
A)  $206.39 
B)  $163.89 
C)  $156.39 
D)  $166.89

Question 18

Select the correct statement regarding quantitative and qualitative information.

Accepted Answer

A)  To be relevant, qualitative data need not be quantified. 
B)  Relevant information cannot have both quantitative and qualitative characteristics. 
C)  Qualitative data should only be considered when quantitative data are inconclusive. 
D)  To be relevant, qualitative data need not differ among the alternatives but must be future-oriented. 
A)  To be relevant, qualitative data need not be quantified. 
B)  Relevant information cannot have both quantitative and qualitative characteristics. 
C)  Qualitative data should only be considered when quantitative data are inconclusive. 
D)  To be relevant, qualitative data need not differ among the alternatives but must be future-oriented.

Question 19

Asset replacement decisions involve:

Accepted Answer

A)  Choices between continuing to use existing materials or replacing them with less expensive materials. 
B)  Choices between closing down or continuing to operate a segment of a business. 
C)  Choices between continuing to operate existing equipment or replacing it with new equipment. 
D)  None of these answers are correct. 
A)  Choices between continuing to use existing materials or replacing them with less expensive materials. 
B)  Choices between closing down or continuing to operate a segment of a business. 
C)  Choices between continuing to operate existing equipment or replacing it with new equipment. 
D)  None of these answers are correct.

Question 20

Which of the following costs is an example of a batch-level cost?

Accepted Answer

A)  Assembly setup costs. 
B)  Materials handling costs. 
C)  Shipping and handling costs to ship an order to a customer. 
D)  All of these answers are correct. 
A)  Assembly setup costs. 
B)  Materials handling costs. 
C)  Shipping and handling costs to ship an order to a customer. 
D)  All of these answers are correct.

Select the correct statement regarding relevant revenues.

Select the correct statement regarding opportunity costs.

Max bought a ticket to the championship baseball game for $175. Someone approaches him outside the stadium and offers him $375 for his ticket. If Max decides to go to the game instead of selling his ticket, how much does it cost Max to go to the game?

The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.

Engineering design costs are generally referred to as:

Indicate whether each of the following statements is true or false.

All of the following are examples of product-level costs except:

Outsourcing reduces the extent of a company's vertical integration.

Select the term from the list provided that best matches each of the following descriptions. Put the number of the term in the column for Your Answer.

Which of the following is not a possible alternate term for costs that can be eliminated by taking a specified course of action?

Facility-level costs are not involved in decisions to eliminate a segment of a business.

Select the correct statement regarding quantitative and qualitative information.

Asset replacement decisions involve:

Which of the following costs is an example of a batch-level cost?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 13: Relevant Information for Special Decisions

Select the correct statement regarding relevant revenues.

Select the correct statement regarding opportunity costs.

Max bought a ticket to the championship baseball game for $175. Someone approaches him outside the stadium and offers him $375 for his ticket. If Max decides to go to the game instead of selling his ticket, how much does it cost Max to go to the game?

The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.

Engineering design costs are generally referred to as:

Indicate whether each of the following statements is true or false.

All of the following are examples of product-level costs except:

Outsourcing reduces the extent of a company's vertical integration.

Select the term from the list provided that best matches each of the following descriptions. Put the number of the term in the column for Your Answer.

Which of the following is not a possible alternate term for costs that can be eliminated by taking a specified course of action?

Facility-level costs are not involved in decisions to eliminate a segment of a business.

Select the correct statement regarding quantitative and qualitative information.

Asset replacement decisions involve:

Which of the following costs is an example of a batch-level cost?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters