Question 1

Which of the following is a constraint function of Prudence?

Accepted Answer

A) Maximize Z = 5X + 14Y. 
B) Minimize Z = 6.50X + 11.25Y. 
C) X $\ge$ 800. 
D) 2X $\le$ 4,000;3Y $\le$ 4,000. 
E) 2X + 3Y $\le$ 4,000. 
A) Maximize Z = 5X + 14Y. 
B) Minimize Z = 6.50X + 11.25Y. 
C) X $\ge$ 800. 
D) 2X $\le$ 4,000;3Y $\le$ 4,000. 
E) 2X + 3Y $\le$ 4,000. E

Question 2

The following costs relate to a variety of decision settings:

Accepted Answer

Required:
Consider each of the nine costs listed and determine whether it is relevant or irrelevant to the decision cited.If the cost is irrelevant,briefly explain why.

Question 3

Flowers Company is operating at capacity and wants to add a new service to its expanding business.The new service should be added as long as service revenues exceed the sum of variable costs and fixed costs.

Accepted Answer

A) True 
 B)False  False

Question 4

Capacity restrictions often change the way that managers make decisions.For example,consider a retailer that has limited square footage in its store.What guideline should be used in deciding which new products to carry? How would this differ,say,from a concert promoter that desires to bring a rock group to an arena-type facility?

Accepted Answer

When a single scarce resource is present

Question 5

Which of the following costs should be used when choosing between two decision alternatives?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 6

Which of the following best defines the concept of a relevant cost?

Accepted Answer

A) A past cost that is the same among alternatives. 
B) A past cost that differs among alternatives. 
C) A future cost that is the same among alternatives. 
D) A future cost that differs among alternatives. 
E) A cost that is based on past experiencE. 
A) A past cost that is the same among alternatives. 
B) A past cost that differs among alternatives. 
C) A future cost that is the same among alternatives. 
D) A future cost that differs among alternatives. 
E) A cost that is based on past experiencE.

Question 7

The City of Miami is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other operating costs.Which of the following items,all related to the transaction,would not be considered in the decision?

Accepted Answer

A) Purchase price of the new vehicle. 
B) Purchase price of the old vehicle. 
C) Savings in operating costs as a result of the new vehicle. 
D) Proceeds from disposal of the old vehicle. 
E) Future depreciation on the new vehiclE. 
A) Purchase price of the new vehicle. 
B) Purchase price of the old vehicle. 
C) Savings in operating costs as a result of the new vehicle. 
D) Proceeds from disposal of the old vehicle. 
E) Future depreciation on the new vehiclE.

Question 8

George Jettson builds custom homes in Cincinnati.Jettson was approached not too long ago by a client about a potential project,and he submitted a bid of $590,000,derived as follows:
A.A relevant cost analysis shows that the home is still profitable at $455,000,and the offer should be accepted.Keep in mind that business is very slow.
   
A.Suppose that business is presently very slow,and the client countered with an offer on this home of $455,000.Should Jettson accept the client's offer? Why?
B.If Jettson has more business than he can handle,how much should he be willing to accept for the home? Why?
B.Since demand is very strong,Jettson should hold firm to the $590,000 price.This way he can cover all of his costs and make his normal 25% profit margin.

Accepted Answer

@#IMG-DLM& 
Jettson adds a 25% profit margin to al

Question 9

The contribution margin per machine hour for Floor Deodorizer is:

Accepted Answer

A) $0.25. 
B) $2.00. 
C) $4.00. 
D) $5.00. 
E) $20.00. 
A) $0.25. 
B) $2.00. 
C) $4.00. 
D) $5.00. 
E) $20.00.

Question 10

An opportunity cost may be described as:

Accepted Answer

A) a forgone benefit. 
B) an historical cost. 
C) a specialized type of variable cost. 
D) a specialized type of fixed cost. 
E) a specialized type of semivariable cost. 
A) a forgone benefit. 
B) an historical cost. 
C) a specialized type of variable cost. 
D) a specialized type of fixed cost. 
E) a specialized type of semivariable cost.

Question 11

The term "opportunity cost" is best defined as:

Accepted Answer

A) the amount of money paid for an item. 
B) the amount of money paid for an item,taking inflation into account. 
C) the amount of money paid for an item,taking possible discounts into account. 
D) the benefit associated with a rejected alternative when making a choice. 
E) an irrelevant decision factor. 
A) the amount of money paid for an item. 
B) the amount of money paid for an item,taking inflation into account. 
C) the amount of money paid for an item,taking possible discounts into account. 
D) the benefit associated with a rejected alternative when making a choice. 
E) an irrelevant decision factor.

Question 12

Phanatix,Inc.produces a variety of products that carry the logos of teams in the Southern Football League (SFL).The company recently paid the league $85,000 for the rights to market a popular player jersey and immediately began production.The following information is available:
Number of jerseys manufactured: 25,000
Cost of jerseys manufactured: $625,000
Amount of manufacturing costs paid to-date: $410,000
Number of jerseys sold to-date: 0
Estimated future marketing costs: $330,000
Anticipated selling price per jersey: $42
The SFL is about to file a lawsuit to stop jersey sales and is demanding another $50,000 from Phanatix for the manufacturing rights.Conversations with Phanatix's attorneys indicate that the league has a strong case and is likely to win the suit.If this situation arises,Phanatix will be unable to recover any amounts paid to the SFL.
Required:
Phanatix's sales department anticipates very strong demand and a sellout of all jerseys manufactured.
A.Determine the overall profitability of the jersey product line if Phanatix settles the disagreement with the SFL and the anticipated sellout occurs.
A.The jerseys produce a $40,000 loss for the company: Sales revenues (25,000 * $42 = $1,050,000)- manufacturing costs ($625,000)- rights ($85,000 + $50,000)- promotion costs ($330,000).
B.Phanatix should pay the $50,000 demanded by the league given that sunk costs in this situation total $710,000 ($85,000 + $625,000).(Although only $410,000 of this latter amount has been paid to-date,the company is liable for 100% of the manufacturing cost incurred. )Thus,for a $50,000 payment,Phanatix will generate $1,050,000 in revenue and incur current/future costs of $380,000 ($330,000 + $50,000),for a net benefit of $670,000.This net benefit will contribute toward covering the previously incurred sunk costs of $710,000.
B.Should the company pay the additional $50,000 demanded by the league or should the jersey program be dropped? Show computations to support your answer.

Accepted Answer

A.The jerseys produce a $40,000 loss for

Question 13

Which of the following costs can be ignored when making a decision?

Accepted Answer

A) Opportunity costs. 
B) Differential costs. 
C) Sunk costs. 
D) Relevant costs. 
E) All future costs. 
A) Opportunity costs. 
B) Differential costs. 
C) Sunk costs. 
D) Relevant costs. 
E) All future costs.

Question 14

Gorski Corporation manufactures parts that are used in the production of washers and dryers.The following costs are associated with part no.65:  
The company received a special-order inquiry from an appliance manufacturer in Spain for 15,000 units of part no.65.Only $3 of fixed manufacturing will be incurred on the order,and the variable selling costs per unit will amount to only $5.Since Gorski has excess capacity,the minimum price that Gorski should charge the Spanish manufacturer is:

Accepted Answer

A) $96. 
B) $99. 
C) $105. 
D) $108. 
E) some other amount. 
A) $96. 
B) $99. 
C) $105. 
D) $108. 
E) some other amount.

Question 15

Occular is studying whether to drop a product because of ongoing losses.Costs that would be relevant in this situation would include variable manufacturing costs as well as:

Accepted Answer

A) factory depreciation. 
B) avoidable fixed costs. 
C) unavoidable fixed costs. 
D) allocated corporate administrative costs. 
E) general corporate advertising. 
A) factory depreciation. 
B) avoidable fixed costs. 
C) unavoidable fixed costs. 
D) allocated corporate administrative costs. 
E) general corporate advertising.

Question 16

The amount of joint cost allocated to Nuts would be:

Accepted Answer

A) $32,000. 
B) $40,000. 
C) $48,000. 
D) $60,000. 
E) $80,000. 
A) $32,000. 
B) $40,000. 
C) $48,000. 
D) $60,000. 
E) $80,000.

Question 17

Tri-County,Inc.is studying whether to expand operations by adding a new product line.Which of the following choices correctly denotes the costs that should be considered in this decision?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 18

Susan is contemplating a job offer with an advertising agency where she will make $54,000 in her first year of employment.Alternatively,Susan can begin to work in her father's business where she will earn an annual salary of $38,000.If Susan decides to work with her father,the opportunity cost would be:

Accepted Answer

A) $0. 
B) $38,000. 
C) $54,000. 
D) $92,000. 
E) irrelevant in deciding which job offer to accept. 
A) $0. 
B) $38,000. 
C) $54,000. 
D) $92,000. 
E) irrelevant in deciding which job offer to accept.

Question 19

In early July,Mike Gottfried purchased a $70 ticket to the December 15 game of the Chicago Titans.(The Titans belong to the Midwest Football League and play their games outdoors on the shore of Lake Michigan. )Parking for the game was expected to cost approximately $22,and Gottfried would probably spend another $15 for a souvenir program and food.It is now December 14.The Titans were having a miserable season and the temperature was expected to peak at 5 degrees on game day.Mike therefore decided to skip the game and took his wife to the movies,with tickets and dinner costing $50.The sunk cost associated with this decision situation is:

Accepted Answer

A) $20. 
B) $50. 
C) $70. 
D) $107. 
E) some other amount. 
A) $20. 
B) $50. 
C) $70. 
D) $107. 
E) some other amount.

Question 20

Two months ago,Victory Corporation purchased 4,500 pounds of Hydrol,paying $15,300.The demand for this product has been very strong since the acquisition,with the market price jumping to $4.05 per pound.(Victory can buy or sell Hydrol at this price. )The company recently received a special-order inquiry,one that would require the use of 4,200 pounds of Hydrol.Which of the following is (are)relevant in deciding whether to accept the special order?

Accepted Answer

A) The 300-pound remaining inventory of Hydrol. 
B) The $4.05 market price. 
C) The $3.40 purchase price. 
D) 4,500 pounds of Hydrol. 
E) Two or more of the above factors are relevant. 
A) The 300-pound remaining inventory of Hydrol. 
B) The $4.05 market price. 
C) The $3.40 purchase price. 
D) 4,500 pounds of Hydrol. 
E) Two or more of the above factors are relevant.

Which of the following is a constraint function of Prudence?

The following costs relate to a variety of decision settings:

Flowers Company is operating at capacity and wants to add a new service to its expanding business.The new service should be added as long as service revenues exceed the sum of variable costs and fixed costs.

Which of the following costs should be used when choosing between two decision alternatives?

Which of the following best defines the concept of a relevant cost?

The City of Miami is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other operating costs.Which of the following items,all related to the transaction,would not be considered in the decision?

The contribution margin per machine hour for Floor Deodorizer is:

An opportunity cost may be described as:

The term "opportunity cost" is best defined as:

Which of the following costs can be ignored when making a decision?

Occular is studying whether to drop a product because of ongoing losses.Costs that would be relevant in this situation would include variable manufacturing costs as well as:

The amount of joint cost allocated to Nuts would be:

Tri-County,Inc.is studying whether to expand operations by adding a new product line.Which of the following choices correctly denotes the costs that should be considered in this decision?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts and Accounting for Mass Customization Operations

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis,cost Behavior,and Cost Estimation

Appendix I: The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Cost-Volume-Profit Analysis

Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing,Operational Performance Measures,and the Balanced Scorecard

Flexible Budgeting and the Management of Overhead and Support Activity Costs

Responsibility Accounting, Quality Control, and Environmental Cost Management

Investment Centers and Transfer Pricing

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 14: Decision Making: Relevant Costs and Benefits

Which of the following is a constraint function of Prudence?

The following costs relate to a variety of decision settings:

Flowers Company is operating at capacity and wants to add a new service to its expanding business.The new service should be added as long as service revenues exceed the sum of variable costs and fixed costs.

Which of the following costs should be used when choosing between two decision alternatives?

Which of the following best defines the concept of a relevant cost?

The City of Miami is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other operating costs.Which of the following items,all related to the transaction,would not be considered in the decision?

The contribution margin per machine hour for Floor Deodorizer is:

An opportunity cost may be described as:

The term "opportunity cost" is best defined as:

Which of the following costs can be ignored when making a decision?

Occular is studying whether to drop a product because of ongoing losses.Costs that would be relevant in this situation would include variable manufacturing costs as well as:

The amount of joint cost allocated to Nuts would be:

Tri-County,Inc.is studying whether to expand operations by adding a new product line.Which of the following choices correctly denotes the costs that should be considered in this decision?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts and Accounting for Mass Customization Operations

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis,cost Behavior,and Cost Estimation

Appendix I: The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Cost-Volume-Profit Analysis

Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing,Operational Performance Measures,and the Balanced Scorecard

Flexible Budgeting and the Management of Overhead and Support Activity Costs

Responsibility Accounting, Quality Control, and Environmental Cost Management

Investment Centers and Transfer Pricing

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

compound Interest and the Concept of Present Value

Inventory Management

Filters