Exam 13: Budgetary Control and Responsibility Accounting

A company is considering replacing old equipment with new equipment.Which of the following is a relevant cost for incremental analysis?

A company is considering the following alternatives: Alternative A Alternative B Revenues \ 120,000 \ 120,000 Variable costs 60,000 70,000 Fixed costs 35,000 35,000 Which of the following are relevant in choosing between the alternatives?

Sala Co.is contemplating the replacement of an old machine with a new one.The following information has been gathered: Old Machine New Machine Price \ 300,000 \ 600,000 Accumulated Depreciation 90,000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs \ 240,000 \ 180,600 If the old machine is replaced it can be sold for $24000. Which of the following amounts is relevant to the replacement decision?

Baden Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176.Fixed manufacturing costs were $480000 when 10000 units were produced and sold.The company has a one-time opportunity to sell an additional 1000 units at $140 each in a foreign market which would not affect its present sales.If the company has sufficient capacity to produce the additional units acceptance of the special order would affect net income as follows:

In a decision concerning replacing old equipment with new equipment the book value of the old equipment can be considered a sunk cost.

Costs incurred before the split-off point are

If a company is operating at less than capacity the incremental costs of a special order will likely include variable manufacturing costs but not fixed costs.

In the analysis concerning the acceptance or rejection of a special order which items are relevant?

It costs Lannon Fields $28 of variable costs and $12 of allocated fixed costs to produce an industrial trash can that sells for $60.A buyer in Mexico offers to purchase 3000 units at $36 each.Lannon Fields has excess capacity and can handle the additional production.What effect will acceptance of the offer have on net income?

Max Company uses 20000 units of Part A in producing its products.A supplier offers to make Part A for $7.Max Company has relevant costs of $8 a unit to manufacture Part A.If there is excess capacity the opportunity cost of not buying Part A from the supplier is

Which of the following steps in the management decision-making process does not generally involve the managerial accountant?

Abel Company produces three versions of baseball bats: wood aluminum and hard rubber.A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales \5 00,000 \2 00,000 \6 5,000 \7 65,000 Variable expenses 325,000 140,000 58,000 523,000 Contribution margin 175,000 60,000 7,000 242,000 Fixed expenses 75,000 35,000 22,000 132,000 Net income (loss) 100,000 \2 5,000 \1 5,000 \1 10,000 Assume all of the fixed expenses for the hard rubber line are avoidable.What will be total net income if the line is dropped?

Nonfinancial information that management might evaluate in making a decision would not include

Able Company's unit manufacturing cost is: Variable Costs $\quad \$ 50$ Fixed Costs $\quad 25$ A special order for 2000 units has been received from a foreign company.The unit price requested is $55.The normal unit price is $80.If the order is accepted unit variable costs will increase by $2 for additional freight costs.If the order is accepted incremental profit (loss) will be

Martin Company incurred the following costs for 70000 units: Variable costs $\$ 420,000$ Fixed costs $\quad 392,000$ Martin has received a special order from a foreign company for 3000 units.There is sufficient capacity to fill the order without jeopardizing regular sales.Filling the order will require spending an additional $6300 for shipping. If Martin wants to earn $6000 on the order what should the unit price be?

Accounting contributes to management's decision-making process through internal reports that review the actual impact of the decision.

What is the increase in profit if the appropriate products are processed further?

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

Opportunity cost is usually

An important step in management's decision-making process is to determine and evaluate possible courses of action.