Question 1

For decision-making purposes,qualitative factors are relevant if they differ among the alternatives and relate to the future.

Accepted Answer

A) True 
 B)False

Question 2

If managers' performance is evaluated solely on the current year's profitability,managers are likely to make decisions that lead to the company's long-term profitability.

Accepted Answer

A) True 
 B)False

Question 3

Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):

Accepted Answer

A)  outsourcing decision. 
B)  special order decision. 
C)  segment elimination decision. 
D)  asset replacement decision. 
A)  outsourcing decision. 
B)  special order decision. 
C)  segment elimination decision. 
D)  asset replacement decision.

Question 4

What are constraints? Provide an example.

Accepted Answer

Answers will vary
A constraint is a bott

Question 5

Hancock Company manufactures and sells two lines of furniture,case goods and upholstery.During the most recent accounting period,the Case Goods and Upholstery Divisions sold 15,000 and 2,000 units,respectively.The company's most recent financial statements are shown below (Do not round intermediate calculations. ): $\begin{array}{c}
\begin{array}{|l|}
\hline\
\hline \text { Sales}\
\hline \text { Less cost of goods sold:}\
\hline \text { Unit-level production cost}\
\hline \text { Depreciation, production equipment}\
\hline \text { Gross margin}\
\hline \text { Less operating expenses:}\
\hline \text { Unit-level selling and admin. Costs}\
\hline \text { Corporate-level facility expenses (fixe d)}\
\hline \text { Net income (loss)}\
\hline 
\end{array}
\begin{array}{ll|}

\hline \text { Case Goods}\
\hline \$ 1,600,000 \
\hline\
\hline1,000,000 \
\hline 240,000 \ 
\hline \$ \quad 360,000\
\hline\
\hline60,000 \ 
\hline52,000 \ 
\hline \$ 248,000 \ 
\hline 
\end{array}
\begin{array}{ll|}
\hline \text {Upholstery}\
\hline\$ 400,000 \
\hline\
\hline240,000 \ 
\hline60,000 \ 
\hline \$ \quad 100,000\
\hline\
\hline50,000 \
\hline 52,000 \
 \hline\$ \quad(2,000) \
\hline 
\end{array} 
\end{array}$

If unit sales for both divisions increased 10%,the company would report which of the following? The word "Costs" should not be capitalized mid-way down.Also,change "admin." to:
Administrative
The cell should read:
Unit-level selling and administrative costs

Accepted Answer

A)  A $52,000 increase in net income for the Upholstery Division 
B)  A 10% increase in total net income of the company 
C)  A decline in profit for the Upholstery Division. 
D)  A net income for the Upholstery Division of $9,000
The word "Costs" should not be capitalized mid-way down.Also,change "admin." to:
Administrative
The cell should read:
Unit-level selling and administrative costs 
A)  A $52,000 increase in net income for the Upholstery Division 
B)  A 10% increase in total net income of the company 
C)  A decline in profit for the Upholstery Division. 
D)  A net income for the Upholstery Division of $9,000
The word "Costs" should not be capitalized mid-way down.Also,change "admin." to:
Administrative
The cell should read:
Unit-level selling and administrative costs

Question 6

Which of the following is a way to relax a constraint or bottleneck?

Accepted Answer

A)  Have employees work overtime. 
B)  Install faster machinery. 
C)  Train workers to improve productivity. 
D)  All of the above. 
A)  Have employees work overtime. 
B)  Install faster machinery. 
C)  Train workers to improve productivity. 
D)  All of the above.

Question 7

Scholastic Tours is trying to decide which one of two tours it will introduce.The costs and revenues associated with each alternative are listed below: $\begin{array}{c}
\begin{array}{|l|}
\hline \
\hline \text {Projected revenue}\
\hline \text {Variable costs}\
\hline \text {Fixed costs}\
\hline \text {Profit}\
\hline  
\end{array}
\begin{array}{rr}
\hline \text { Eastern Tour }\
\hline \$ \quad 14,000 \
\hline  2,000 \
\hline  6,000 \
\hline \$ \quad 6,000 \
 \hline 
\end{array}
\begin{array}{|l|}
\hline \text { Western Tour }\
\hline \$ \quad 18,000 \
\hline 10,000 \
\hline  6,000 \
\hline \$ \quad 2,000\
\hline 
\end{array}
\end{array}$
 What are the incremental (differential)costs of the Western Tour?

Accepted Answer

A)  $4,000 
B)  $6,000 
C)  $8,000 
D)  None of the above. 
A)  $4,000 
B)  $6,000 
C)  $8,000 
D)  None of the above.

Question 8

Which of the following is not a possible alternate term for costs that can be eliminated by taking a specified course of action?

Accepted Answer

A)  Avoidable costs 
B)  Opportunity costs 
C)  Relevant costs 
D)  Differential costs 
A)  Avoidable costs 
B)  Opportunity costs 
C)  Relevant costs 
D)  Differential costs

Question 9

Select the incorrect statement regarding relevant costs and revenues.

Accepted Answer

A)  To be relevant,a cost or revenue must be future-oriented and must differ between the alternatives. 
B)  Sunk costs are never relevant for decision-making purposes. 
C)  Differential revenues are expected future revenues that differ from past revenues. 
D)  Avoidable costs are also known as differential costs. 
A)  To be relevant,a cost or revenue must be future-oriented and must differ between the alternatives. 
B)  Sunk costs are never relevant for decision-making purposes. 
C)  Differential revenues are expected future revenues that differ from past revenues. 
D)  Avoidable costs are also known as differential costs.

Question 10

Bates Company plans to add a new item to its line of consumer product offerings.Two possible products are under consideration.Each unit of Product A costs $6 to produce and has a contribution margin of $3,while each unit of Product B costs $12 and has a contribution margin of $4.What is the differential revenue for this decision?

Accepted Answer

A)  $7 
B)  $1 
C)  $6 
D)  $9 
A)  $7 
B)  $1 
C)  $6 
D)  $9

Question 11

For an equipment replacement decision,what costs are relevant,and what costs are not relevant?

Accepted Answer

Answers will vary
Costs that are relevan

Question 12

Discuss why qualitative characteristics must be considered when making decisions such as special orders,outsourcing,elimination and replacement decisions and scarce resource allocation decisions.Give examples.

Accepted Answer

Answers will vary
As with quantitative d

Question 13

Although opportunity costs are not recorded in the financial records,they nevertheless are useful for decision making.

Accepted Answer

A) True 
 B)False

Question 14

For many managerial decisions (such as outsourcing and special order decisions),unit-level costs are avoidable costs.

Accepted Answer

A) True 
 B)False

Question 15

Relevant costs are frequently called unavoidable costs.

Accepted Answer

A) True 
 B)False

Question 16

Benitez Company currently outsources a relay switch that is a component in one of its products.The switches cost $20 each.The company is considering making the switches internally at the following projected annual production costs: $$\begin{array} { | l |l l | } 
\hline \text { Unit-level material cost } & \$ & 3 \
\hline \text { Unit-level labor cost } & \$ & 2 \
\hline \text { Unit-level overhead } & \$ & 1 \
\hline \text { Batch-level set-up cost ( } 5,000 \text { units per batch) } & \$ 25,000 \
\hline \text { Product-level supervisory salaries } & \$ 37,500 \
\hline \text { Allocated facility-level costs } & \$ 20,000 \
\hline
\end{array}$$ The company expects an annual need for 5,000 switches.If the company makes the product,it will have to utilize factory space currently being leased to another company for $1,500 a month.If the company decides to make the parts,total costs will be:

Accepted Answer

A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased. 
A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased.

Question 17

Expected future revenues that differ among the alternatives under consideration are often referred to as:

Accepted Answer

A)  Alternative revenues. 
B)  Preferential revenues. 
C)  Relative revenues. 
D)  Differential revenues. 
A)  Alternative revenues. 
B)  Preferential revenues. 
C)  Relative revenues. 
D)  Differential revenues.

Question 18

Relevant costs are often referred to as:

Accepted Answer

A)  Unavoidable costs 
B)  Diffential costs 
C)  Sunk costs 
D)  All of the above 
A)  Unavoidable costs 
B)  Diffential costs 
C)  Sunk costs 
D)  All of the above

Question 19

One of the potential dangers from outsourcing is the possible occurrence of low-ball pricing.

Accepted Answer

A) True 
 B)False

Question 20

Costs that are not related to any specific product,batch,or unit of production are referred to as facility-level costs.

Accepted Answer

A) True 
 B)False

For decision-making purposes,qualitative factors are relevant if they differ among the alternatives and relate to the future.

If managers' performance is evaluated solely on the current year's profitability,managers are likely to make decisions that lead to the company's long-term profitability.

Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):

What are constraints? Provide an example.

Which of the following is a way to relax a constraint or bottleneck?

Which of the following is not a possible alternate term for costs that can be eliminated by taking a specified course of action?

Select the incorrect statement regarding relevant costs and revenues.

For an equipment replacement decision,what costs are relevant,and what costs are not relevant?

Discuss why qualitative characteristics must be considered when making decisions such as special orders,outsourcing,elimination and replacement decisions and scarce resource allocation decisions.Give examples.

Although opportunity costs are not recorded in the financial records,they nevertheless are useful for decision making.

For many managerial decisions (such as outsourcing and special order decisions),unit-level costs are avoidable costs.

Relevant costs are frequently called unavoidable costs.

Expected future revenues that differ among the alternatives under consideration are often referred to as:

Relevant costs are often referred to as:

One of the potential dangers from outsourcing is the possible occurrence of low-ball pricing.

Costs that are not related to any specific product,batch,or unit of production are referred to as facility-level costs.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 6: Relevant Information for Special Decisions

For decision-making purposes,qualitative factors are relevant if they differ among the alternatives and relate to the future.

If managers' performance is evaluated solely on the current year's profitability,managers are likely to make decisions that lead to the company's long-term profitability.

Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):

What are constraints? Provide an example.

Which of the following is a way to relax a constraint or bottleneck?

Which of the following is not a possible alternate term for costs that can be eliminated by taking a specified course of action?

Select the incorrect statement regarding relevant costs and revenues.

For an equipment replacement decision,what costs are relevant,and what costs are not relevant?

Discuss why qualitative characteristics must be considered when making decisions such as special orders,outsourcing,elimination and replacement decisions and scarce resource allocation decisions.Give examples.

Although opportunity costs are not recorded in the financial records,they nevertheless are useful for decision making.

For many managerial decisions (such as outsourcing and special order decisions),unit-level costs are avoidable costs.

Relevant costs are frequently called unavoidable costs.

Expected future revenues that differ among the alternatives under consideration are often referred to as:

Relevant costs are often referred to as:

One of the potential dangers from outsourcing is the possible occurrence of low-ball pricing.

Costs that are not related to any specific product,batch,or unit of production are referred to as facility-level costs.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters