Question 1

A constraint is a factor that restricts production or sale of a product.

Accepted Answer

A) True 
 B)False

Question 2

Contribution margin income statement data for the most recent year follow:   Assuming the Dog food line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the Dog food line is used to double the production of Cat food, how will operating income be affected?

Accepted Answer

A) Increase $90,000 
B) Increase $246,000 
C) Increase $168,000 
D) Decrease $90,000 
A) Increase $90,000 
B) Increase $246,000 
C) Increase $168,000 
D) Decrease $90,000

Question 3

An "opportunity cost" is best described by which of the following?

Accepted Answer

A) Benefits foregone by choosing a particular alternative course of action 
B) Costs that were incurred in the past and cannot be changed 
C) The distribution of all products to be sold 
D) Expected future costs that differ among alternatives 
A) Benefits foregone by choosing a particular alternative course of action 
B) Costs that were incurred in the past and cannot be changed 
C) The distribution of all products to be sold 
D) Expected future costs that differ among alternatives

Question 4

In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered relevant data.

Accepted Answer

A) True 
 B)False

Question 5

Cost-plus price minus desired profit equals total cost.

Accepted Answer

A) True 
 B)False

Question 6

Managers need to consider variable costs, fixed costs, inventoriable product costs and period costs when setting prices.

Accepted Answer

A) True 
 B)False

Question 7

A special order occurs when a customer requests a one-time order at an increased sales price.

Accepted Answer

A) True 
 B)False

Question 8

All About Animals has two product lines: Cat food and Dog food. Contribution margin income statement data for the most recent year follow:   Assuming total fixed costs remain unchanged, how would discontinuing the Dog food line affect operating income?

Accepted Answer

A) Increase in total operating income of $33,000 
B) Increase in total operating income of $159,000 
C) Decrease in total operating income of $45,000 
D) Decrease in total operating income of $111,000 
A) Increase in total operating income of $33,000 
B) Increase in total operating income of $159,000 
C) Decrease in total operating income of $45,000 
D) Decrease in total operating income of $111,000

Question 9

Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $45 million of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20,000,000 for the golfing season. About 400,000 golfers are expected each year. Variable costs are about $15 per golfer. Mountaintop golf course is a price-taker and won't be able to charge more than its competitors who charge $75 per round of golf. What profit will it earn as a percent of assets?

Accepted Answer

A) Loss of 8.89% 
B) Profit of 35.56% 
C) Profit of 8.89% 
D) Loss of 57.67% 
A) Loss of 8.89% 
B) Profit of 35.56% 
C) Profit of 8.89% 
D) Loss of 57.67%

Question 10

Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following costs and data relate to the production of Part P40:   Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $2,000 profit. If Jackson Corporation makes the part, what will its operating income be?

Accepted Answer

A) $5,500 less than if the company bought the part 
B) $5,500 greater than if the company bought the part 
C) 9,500 greater than if the company bought the part 
D) $111,500 greater than if the company bought the part 
A) $5,500 less than if the company bought the part 
B) $5,500 greater than if the company bought the part 
C) 9,500 greater than if the company bought the part 
D) $111,500 greater than if the company bought the part

A constraint is a factor that restricts production or sale of a product.

Contribution margin income statement data for the most recent year follow: Assuming the Dog food line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the Dog food line is used to double the production of Cat food, how will operating income be affected?

An "opportunity cost" is best described by which of the following?

In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered relevant data.

Cost-plus price minus desired profit equals total cost.

Managers need to consider variable costs, fixed costs, inventoriable product costs and period costs when setting prices.

A special order occurs when a customer requests a one-time order at an increased sales price.

All About Animals has two product lines: Cat food and Dog food. Contribution margin income statement data for the most recent year follow: Assuming total fixed costs remain unchanged, how would discontinuing the Dog food line affect operating income?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, Lean Operations, and the Costs of Quality

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters

Exam 8: Relevant Costs for Short-Term Decisions

A constraint is a factor that restricts production or sale of a product.

Contribution margin income statement data for the most recent year follow: Assuming the Dog food line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the Dog food line is used to double the production of Cat food, how will operating income be affected?

An "opportunity cost" is best described by which of the following?

In deciding whether to accept a special sales order, any fixed costs that would remain unchanged are considered relevant data.

Cost-plus price minus desired profit equals total cost.

Managers need to consider variable costs, fixed costs, inventoriable product costs and period costs when setting prices.

A special order occurs when a customer requests a one-time order at an increased sales price.

All About Animals has two product lines: Cat food and Dog food. Contribution margin income statement data for the most recent year follow: Assuming total fixed costs remain unchanged, how would discontinuing the Dog food line affect operating income?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, Lean Operations, and the Costs of Quality

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters