Question 1

Which of the following is true when making product and process decisions?

Accepted Answer

A)  Opportunity costs should never be included in making a decision. 
B)  All costs should be taken into account when making a decision. 
C)  Only the differential costs should be used to make a decision. 
D)  None of these are true. 
A)  Opportunity costs should never be included in making a decision. 
B)  All costs should be taken into account when making a decision. 
C)  Only the differential costs should be used to make a decision. 
D)  None of these are true.

Question 2

Bellevue, Inc. reported the following financial information for the year just ended:
   Given this information, Bellevue is considering closing Division A and Division B. Before making a final decision, Bellevue's controller decided to separate the total costs into variable costs, direct fixed costs and common fixed costs. The following chart shows the controller's list of separated costs:

Accepted Answer

Given this information, Bellevue is cons

Question 3

The resource that limits operating capacity by its availability is the:

Accepted Answer

A)  Outsourcing factor 
B)  Common cost factor 
C)  Special resource factor 
D)  Critical resource factor 
A)  Outsourcing factor 
B)  Common cost factor 
C)  Special resource factor 
D)  Critical resource factor

Question 4

Make-or-buy decisions should be based on:

Accepted Answer

A)  Total costs 
B)  Only variable costs 
C)  Variable costs and indirect fixed costs 
D)  Variable costs and direct fixed costs 
A)  Total costs 
B)  Only variable costs 
C)  Variable costs and indirect fixed costs 
D)  Variable costs and direct fixed costs

Question 5

In relation to the critical resource factor, a company will maximize net income by selling products that:

Accepted Answer

A)  Have the lowest variable costs 
B)  Have the highest selling price 
C)  Contribute the most toward fixed costs 
D)  Have the lowest differential costs 
A)  Have the lowest variable costs 
B)  Have the highest selling price 
C)  Contribute the most toward fixed costs 
D)  Have the lowest differential costs

Question 6

A cost that is measured by the benefits forgone from an alternative use of resources is called a(n):

Accepted Answer

A)  Sunk cost 
B)  Opportunity cost 
C)  Differential cost 
D)  Standard cost 
A)  Sunk cost 
B)  Opportunity cost 
C)  Differential cost 
D)  Standard cost

Question 7

Amador Company is pricing a new line of recliners. Production costs for each recliner are as follows:

Accepted Answer

The answer of Amador Company is pricing a new line...

Question 8

Hopson Company is located in a large city that has good access to both raw materials and a dependable labor supply. Real estate in the city is extremely expensive, and Hopson's warehouse is always full because the company operates at 100% capacity. Hopson's critical resource probably is:

Accepted Answer

A)  Labor hours 
B)  Availability of raw materials 
C)  Floor space 
D)  Machine hours 
A)  Labor hours 
B)  Availability of raw materials 
C)  Floor space 
D)  Machine hours

Question 9

Which of the following should be considered in a decision to enter a market?

Accepted Answer

A)  Effects on profits 
B)  Effects on quality 
C)  Effects on delivery time 
D)  All of these are correct 
A)  Effects on profits 
B)  Effects on quality 
C)  Effects on delivery time 
D)  All of these are correct

Question 10

Exhibit 22-4 Lauria Electronics has excess capacity that could be used to make 2,000 antennas for the cell phones that the company produces. The following cost figures are available:
  Lauria can buy the antennas from an outside supplier for $10.50.
Refer to Exhibit 22-4. Given the data above, if Lauria has idle facilities with no alternative use, it should:

Accepted Answer

A)  Buy the antennas from the outside supplier 
B)  Make the antennas 
C)  Lauria would be equally well off either buying or making the antennas 
D)  The answer cannot be determined 
A)  Buy the antennas from the outside supplier 
B)  Make the antennas 
C)  Lauria would be equally well off either buying or making the antennas 
D)  The answer cannot be determined

Question 11

Humboldt Company manufactures two types of products: tables and chairs. The company can sell as many units of each product as it can produce, but production is limited by the availability of direct labor hours. The revenues, costs, and labor hours for the two products are as follows:
  
Humboldt Company has 2,000 direct labor hours available for production.

Accepted Answer

Humboldt Company has

Question 12

For which decision would a store manager's salary be a differential cost?

Accepted Answer

A)  Adding a department 
B)  Closing the store 
C)  Increasing sales 10% 
D)  Leasing a larger store 
A)  Adding a department 
B)  Closing the store 
C)  Increasing sales 10% 
D)  Leasing a larger store

Question 13

CharCore mixes together wood chips and pine oil. After joint manufacturing costs of $2,000 have been incurred, the mixture separates into two products, granulated charcoal and methyl alcohol. At the split-off point, granulated charcoal can be sold for $5,000 and the alcohol can be sold for $9,000. The charcoal can be further processed at a cost of $6,000 to make air filters which could be sold for $15,000. The alcohol can be further processed at a cost of $7,000 to make a cleaning solvent which could be sold for $14,000. Which product should be processed further?

Accepted Answer

A)  Granulated charcoal only 
B)  Methyl alcohol only 
C)  Both granulated charcoal and methyl alcohol 
D)  Neither granulated charcoal nor methyl alcohol 
A)  Granulated charcoal only 
B)  Methyl alcohol only 
C)  Both granulated charcoal and methyl alcohol 
D)  Neither granulated charcoal nor methyl alcohol

Question 14

Exhibit 22-1 Lumens Corporation makes ornamental lamps. The costs per lamp are the following:
  The manufacturing overhead can be divided into 40% variable manufacturing overhead and 60% fixed manufacturing overhead.
Refer to Exhibit 22-1. To earn a reasonable return and cover administrative and selling expenses, Lumens normally sells its lamps for $200 each. Given this information, Lumens's variable cost of making each lamp is:

Accepted Answer

A)  $90 
B)  $100 
C)  $120 
D)  $130 
A)  $90 
B)  $100 
C)  $120 
D)  $130

Question 15

Exhibit 22-5 Imperial Company manufactures two types of fruit drinks, Tropical and Hawaiian. The company can sell as many bottles of each product as it can produce, but production is limited by the availability of direct labor hours. The revenues, costs, and labor hours for the two products are as follows:
  Refer to Exhibit 22-5. With 1,000 direct labor hours available for production, if Imperial Company uses the entire amount to produce Tropical, the contribution margin in total dollars would be:

Accepted Answer

A)  $24,000 
B)  $30,000 
C)  $48,000 
D)  $60,000 
A)  $24,000 
B)  $30,000 
C)  $48,000 
D)  $60,000

Question 16

Which of the following criteria should be used when making a decision about whether or not to drop a market segment?

Accepted Answer

A)  Total contribution margin of the segment 
B)  Contribution margin available to cover indirect fixed costs 
C)  Net income of the segment 
D)  Segment margin available to cover indirect fixed costs 
A)  Total contribution margin of the segment 
B)  Contribution margin available to cover indirect fixed costs 
C)  Net income of the segment 
D)  Segment margin available to cover indirect fixed costs

Question 17

Decisions to drop a product line must take into consideration:

Accepted Answer

A)  All differential costs 
B)  Qualitative factors 
C)  Joint costs 
D)  All of these are correct 
A)  All differential costs 
B)  Qualitative factors 
C)  Joint costs 
D)  All of these are correct

Question 18

Exhibit 22-7 West Star Company is planning to market a new computer and must decide on a proper selling price. The following cost information for the manufacture of one computer has been compiled:
  Refer to Exhibit 22-7. If the selling price is set at $400 and both variable and fixed costs are treated as product costs, what is the markup percentage based on selling price?

Accepted Answer

A)  25% 
B)  30% 
C)  40% 
D)  50% 
A)  25% 
B)  30% 
C)  40% 
D)  50%

Question 19

When managers are deciding how much of each product to sell to maximize net income, they should:

Accepted Answer

A)  Focus on the product that contributes the most toward covering indirect fixed costs in relation to the critical resource factor 
B)  Focus on the product that has the highest contribution margin, regardless of its relation to the critical resource factor 
C)  Focus on the product that has the highest selling price 
D)  Focus on the product that has the lowest variable costs 
A)  Focus on the product that contributes the most toward covering indirect fixed costs in relation to the critical resource factor 
B)  Focus on the product that has the highest contribution margin, regardless of its relation to the critical resource factor 
C)  Focus on the product that has the highest selling price 
D)  Focus on the product that has the lowest variable costs

Question 20

In a make-or-buy decision, management would consider:

Accepted Answer

A)  Cost advantages 
B)  Negative qualitative factors 
C)  Alternative uses for idle facilities 
D)  All of these should be considered 
A)  Cost advantages 
B)  Negative qualitative factors 
C)  Alternative uses for idle facilities 
D)  All of these should be considered

Which of the following is true when making product and process decisions?

The resource that limits operating capacity by its availability is the:

Make-or-buy decisions should be based on:

In relation to the critical resource factor, a company will maximize net income by selling products that:

A cost that is measured by the benefits forgone from an alternative use of resources is called a(n):

Amador Company is pricing a new line of recliners. Production costs for each recliner are as follows:

Hopson Company is located in a large city that has good access to both raw materials and a dependable labor supply. Real estate in the city is extremely expensive, and Hopson's warehouse is always full because the company operates at 100% capacity. Hopson's critical resource probably is:

Which of the following should be considered in a decision to enter a market?

For which decision would a store manager's salary be a differential cost?

Which of the following criteria should be used when making a decision about whether or not to drop a market segment?

Decisions to drop a product line must take into consideration:

When managers are deciding how much of each product to sell to maximize net income, they should:

In a make-or-buy decision, management would consider:

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Capital Investment Decisions

New Measures of Performance

Filters

Exam 22: Relevant Information and Decisions

Which of the following is true when making product and process decisions?

The resource that limits operating capacity by its availability is the:

Make-or-buy decisions should be based on:

In relation to the critical resource factor, a company will maximize net income by selling products that:

A cost that is measured by the benefits forgone from an alternative use of resources is called a(n):

Amador Company is pricing a new line of recliners. Production costs for each recliner are as follows:

Hopson Company is located in a large city that has good access to both raw materials and a dependable labor supply. Real estate in the city is extremely expensive, and Hopson's warehouse is always full because the company operates at 100% capacity. Hopson's critical resource probably is:

Which of the following should be considered in a decision to enter a market?

For which decision would a store manager's salary be a differential cost?

Which of the following criteria should be used when making a decision about whether or not to drop a market segment?

Decisions to drop a product line must take into consideration:

When managers are deciding how much of each product to sell to maximize net income, they should:

In a make-or-buy decision, management would consider:

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Capital Investment Decisions

New Measures of Performance

Filters