Exam 13: Budgetary Control and Responsibility Accounting

In deciding on the future status of an unprofitable segment management should recognize that net income could decrease by eliminating the unprofitable segment.

Which of the following terms are synonymous?

Incremental analysis would be appropriate for

It is better not to replace old equipment if it is not fully depreciated.

A company is deciding whether or not to replace some old equipment with new equipment.Which of the following is not considered in the incremental analysis?

A company is deciding on whether to replace some old equipment with new equipment.Which of the following is not a relevant cost for incremental analysis?

The opportunity cost associated with this order is

What of the following would notbe relevant in a make-or-buy decision?

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 a sunk cost?

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

The costs incurred prior to the split-off point are referred to as

If the outside supplier offers a unit price of $68 net income will increase (decrease) by

If an incremental make or buy analysis indicates that it is cheaper to buy rather than make an item management should always make the decision to choose the lowest cost alternative.

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

Fornelli Inc.can produce 100 units of a component part with the following costs: Direct Materials \ 15,000 Direct Labor 6,500 Variable Overhead 16,000 Fixed Overhead 11,000 If Fornelli Inc.can purchase the units externally for $40000 by what amount will its total costs change?

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. The net advantage (disadvantage) of replacing the old machine is

Pratt Company has old inventory on hand that cost $15000.Its scrap value is $20000.The inventory could be sold for $50000 if manufactured further at an additional cost of $15000.What should Pratt do?

Alvarez Company is considering the following alternatives: Alternative A Alternative B Revenues \ 50,000 \ 60,000 Variable costs 30,000 30,000 Fixed costs 10,000 16,000 What is the incremental profit?

The basic decision rule in a sell or process further decision is: process further if the incremental revenue from processing exceeds the incremental processing costs.

Crigui Music produces 60000 CDs on which to record music.The CDs have the following costs: Direct Materials \ 13,000 Direct Labor 15,000 Variable Overhead 3,000 Fixed Overhead 7,000 Crigui could avoid $4000 in fixed overhead costs if it acquires the CDs externally.If cost minimization is the major consideration and the company would prefer to buy the 60000 units externally what is the maximum external price that Crigui would expect to pay for the units?