Question 1

Alex brought his lunch today but now a co-worker has asked him to go to the deli across the street.Select the correct statement from the following.

Accepted Answer

A)  The cost of the lunch Alex had brought is relevant to Alex's decision to have lunch with his friend. 
B)  The cost of the lunch that Alex had brought has nothing to do with his current decision. 
C)  The cost to buy lunch at the deli is not relevant because it has not yet been incurred. 
D)  The cost of the lunch Alex already has represents the opportunity cost of dining with his friend. 
A)  The cost of the lunch Alex had brought is relevant to Alex's decision to have lunch with his friend. 
B)  The cost of the lunch that Alex had brought has nothing to do with his current decision. 
C)  The cost to buy lunch at the deli is not relevant because it has not yet been incurred. 
D)  The cost of the lunch Alex already has represents the opportunity cost of dining with his friend.

Question 2

All of the following are examples of product-level costs except:

Accepted Answer

A)  product inspection costs. 
B)  product advertising costs. 
C)  engineering design costs. 
D)  patent costs. 
A)  product inspection costs. 
B)  product advertising costs. 
C)  engineering design costs. 
D)  patent costs.

Question 3

The Enhanced Products Division of Forrest Industries makes ceramic pots that are used to hold large decorative plants.During 2013the current year,the division produced 10,000 pots and incurred the following costs: $\begin{array}{|l|r|}
\hline \text { Unit-level materials costs }(10,000 @ \$ 15) & \$ 150,000 \
\hline \text { Unit-level labor costs (10,000@ \$20)} & 200,000 \
\hline \text { Unit-level overhead costs }(10,000 @ \$ 16) & 160,000 \
\hline \text { Depreciation expenses on equipment* } & 12,000 \
\hline \text { Other manufacturing overhead } & 36,000 \
\hline
\end{array}$ *The equipment was purchased last year for $150,000 and has a current book value of $120,000,remaining useful life of four years,and a zero salvage value.If the equipment is not used to produce ceramic pots,it can be leased for $8,000 per year.
**Includes supervisors' salaries and rent for manufacturing plant.
Required:
1)Assume Evergreen Industries uses a cost plus pricing strategy.What price should be charged for the ceramic pot product if the division sets its price 40 percent above the unit product cost?
2)A potential overseas customer who would not compete with the division's existing customers would like to purchase 1,000 ceramic pots but is not willing to pay the regular price.At what selling price would the division be indifferent about accepting the special order?
3)Suppose the division has the opportunity to purchase the ceramic pot from another manufacturer for $60.The supplier is willing to hold sufficient inventories to meet Evergreen's demand.Should the division outsource its ceramic pots? Why or why not?

Accepted Answer

1)The ceramic pot should sell at $78.12

Question 4

Equipment should be evaluated for possible replacement only as it nears the end of its useful life.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following costs is an example of a batch-level cost?

Accepted Answer

A)  Assembly setup costs 
B)  Materials handling costs 
C)  Shipping and handling costs to ship an order to a customer 
D)  All of the above. 
A)  Assembly setup costs 
B)  Materials handling costs 
C)  Shipping and handling costs to ship an order to a customer 
D)  All of the above.

Question 6

Select the correct statement regarding quantitative and qualitative information.

Accepted Answer

A)  To be relevant,qualitative data need not be quantified. 
B)  Relevant information cannot have both quantitative and qualitative characteristics. 
C)  Qualitative data should only be considered when quantitative data are inconclusive. 
D)  To be relevant,qualitative data need not differ between the alternatives but must be future-oriented. 
A)  To be relevant,qualitative data need not be quantified. 
B)  Relevant information cannot have both quantitative and qualitative characteristics. 
C)  Qualitative data should only be considered when quantitative data are inconclusive. 
D)  To be relevant,qualitative data need not differ between the alternatives but must be future-oriented.

Question 7

The management practice that increases profitability through the management of bottlenecks is known as:

Accepted Answer

A)  the theory of constraints. 
B)  the theory of restraints. 
C)  the materiality principle. 
D)  total quality management. 
A)  the theory of constraints. 
B)  the theory of restraints. 
C)  the materiality principle. 
D)  total quality management.

Question 8

Sunk costs:

Accepted Answer

A)  are not considered when evaluating new proposals. 
B)  differ among the alternatives. 
C)  impact the future. 
D)  are relevant. 
A)  are not considered when evaluating new proposals. 
B)  differ among the alternatives. 
C)  impact the future. 
D)  are relevant.

Question 9

Great Outdoors Company operates a store in downtown Denver that has five departments including a fishing department.If the fishing department is closed,the store manager's position will not be affected,but if the entire store is closed,the manager will be terminated.Which of the following lessons should be learned from this example?

Accepted Answer

A)  Opportunity costs are always present. 
B)  Sunk costs cannot be avoided. 
C)  Relevance of costs is context sensitive. 
D)  Information does not have to be precisely accurate in order to be relevant. 
A)  Opportunity costs are always present. 
B)  Sunk costs cannot be avoided. 
C)  Relevance of costs is context sensitive. 
D)  Information does not have to be precisely accurate in order to be relevant.

Question 10

Which of the following items is qualitative?

Accepted Answer

A)  Cost of new machine 
B)  Depreciation of existing machine 
C)  Book value of the existing machine 
D)  Degree to which the new machine can be integrated with existing machinery 
A)  Cost of new machine 
B)  Depreciation of existing machine 
C)  Book value of the existing machine 
D)  Degree to which the new machine can be integrated with existing machinery

Question 11

The Mendez Company is trying to decide whether to replace a packing machine that it uses to pack salsa into individual serving size packages.The following information is provided: $\begin{array}{|l|lr|}
\hline \text { Current machine: }\

\hline \text { Original cost } & \$ & 26,000 \
\hline \text { Ac cumulate d depreciation } & & 16,000 \
\hline \text { Annual operating costs } & & 4,000 \
\hline \text { Current salvage value } & & 4,000 \
\hline \text { Salvage value at the end of five years } & & 1,000\
\hline \
\hline \text { New machine: }\
\hline \text { Cost } & \$ & 16,000 \
\hline \text { Annual operating costs } & & 1,000 \
\hline \text { Salvage value at the end of five years } & & 1,000\
\hline
\end{array}$ Required:
1)Compute the increase or decrease in total net income over the five-year period if the company chooses to buy the new machine.
2)Compute the impact on the company's net income in the first year if the current machine is replaced.Do not take depreciation into account.
3)Under what circumstances might a manager not take the action that is in the best interest of the firm in the long run?

Accepted Answer

1)Increase or decrease in income: \[\beg

Question 12

The practice of relaxing constraints is likely to increase a business's profitability.

Accepted Answer

A) True 
 B)False

Question 13

Select the term from the list provided that best matches each of the following descriptions.Put the number of the term in the column for Your Answer.

Accepted Answer

The answer of Select the term from the list provided...

Question 14

Select the correct statement regarding relevant costs and revenues.

Accepted Answer

A)  Sunk costs are relevant for decision-making purposes. 
B)  Relevant costs are frequently called unavoidable costs. 
C)  Direct labor is an example of a unit-level cost. 
D)  Only variable costs are relevant for decision making. 
A)  Sunk costs are relevant for decision-making purposes. 
B)  Relevant costs are frequently called unavoidable costs. 
C)  Direct labor is an example of a unit-level cost. 
D)  Only variable costs are relevant for decision making.

Question 15

Anton Valve Company produces a mechanical valve used in water systems.Three years ago the company introduced an electronic version of the valve.Sales of the mechanical model have steadily declined,and the company will report a loss on the product this year as follows: $\begin{array}{|l|r|}
\hline \text { Sales revenue } & \$ \quad 200,000 \
\hline \text { Less costs: } &  \
\hline \text { Unit-level manufacturing costs } & \$ \quad 157,500 \
\hline \text { Batch-level costs } &  2,500 \
\hline \text { Product-level costs } & 5,000 \
\hline \text { Facility-level costs } & 30,000 \
\hline \text { Allocated corporate costs } &  \underline {  11,500 }\
\hline \text { Total costs } &  \underline {  \$\quad 206,500} \
\hline \text { Net loss } & \underline {   \$ \quad(6,500) }\
\hline
\end{array}$ If production of the mechanical valve is discontinued,product-level costs will be eliminated but facility level and corporate costs would not be affected.
Required:
1)Prepare a quantitative analysis that indicates whether the valve should be discontinued.
2)What qualitative factors should be considered in this decision?

Accepted Answer

1)The relevant revenues and costs are as

Question 16

Which of the following statements is incorrect?

Accepted Answer

A)  An outsourcing decision typically affects only product-level costs. 
B)  Accepting a special order will involve incurring unit-level costs. 
C)  Eliminating a business segment often allows a company to avoid some facility-level costs. 
D)  Facility-level costs generally are not relevant in special order decisions. 
A)  An outsourcing decision typically affects only product-level costs. 
B)  Accepting a special order will involve incurring unit-level costs. 
C)  Eliminating a business segment often allows a company to avoid some facility-level costs. 
D)  Facility-level costs generally are not relevant in special order decisions.

Question 17

The costs and revenues associated with two alternatives are listed below: $$\begin{array} { | l | r | r | } 
\hline & \text { Altemative 1 } & \text { Alternative 2 } \
\hline \text { Projected revenue } & \$ 100,000 & \$ 125,000 \
\hline \text { Unit-level costs } & 20,000 & 30,000 \
\hline \text { Batch-level costs } & 20,000 & 25,000 \
\hline \text { Product-level costs } & 15,000 & 15,000 \
\hline \text { Facility-level costs } & 10,000 & 10,000 \
\hline
\end{array}$$ Which alternative should be selected based on this information?

Accepted Answer

A)  Alternative 2 because it has a higher profit. 
B)  Alternative 2 because it has the same product- & facility-level costs. 
C)  Alternative 1 because it has fewer unit-level costs. 
D)  Alternative 1 because it has a higher profit. 
A)  Alternative 2 because it has a higher profit. 
B)  Alternative 2 because it has the same product- & facility-level costs. 
C)  Alternative 1 because it has fewer unit-level costs. 
D)  Alternative 1 because it has a higher profit.

Question 18

Chase Business College offers the following computer continuing education courses: $$\begin{array} { | l | l| r | l r | l r | } 
\hline & \text { Course A } &  { \text { Course B } } & { \text { Course C } } \
\hline \text { Total student fees } & \$  90 & \$  150 & \$  120 \
\hline \text { Variable costs } & \$  40 & \$ 60 & \$ 50 \
\hline \text { Course length } & 2 \text { hours } &  5 \text { hours } & \text { 4 hours } \
\hline
\end{array}$$ Required:
1)Assuming the college has limited computer lab time available,which course should it first select to offer?
2)How many sections of each course should be offered if the college has paid for 100 hours of computer lab time in a nearby convention center and that the demand for each course is as follows: A,20 sections;B,15 sections;and C,10 sections.
3)Compute the profit from the three courses assuming the college paid $1,000 for the 100 hours of computer lab time and it offers the sections you recommended in Requirement 2.

Accepted Answer

1)Course A should be given priority beca

Question 19

Only variable costs are relevant for decision making.

Accepted Answer

A) True 
 B)False

Alex brought his lunch today but now a co-worker has asked him to go to the deli across the street.Select the correct statement from the following.

All of the following are examples of product-level costs except:

Equipment should be evaluated for possible replacement only as it nears the end of its useful life.

Which of the following costs is an example of a batch-level cost?

Select the correct statement regarding quantitative and qualitative information.

The management practice that increases profitability through the management of bottlenecks is known as:

Sunk costs:

Which of the following items is qualitative?

The practice of relaxing constraints is likely to increase a business's profitability.

Select the term from the list provided that best matches each of the following descriptions.Put the number of the term in the column for Your Answer.

Select the correct statement regarding relevant costs and revenues.

Which of the following statements is incorrect?

Only variable costs are relevant for decision making.

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

Alex brought his lunch today but now a co-worker has asked him to go to the deli across the street.Select the correct statement from the following.

All of the following are examples of product-level costs except:

Equipment should be evaluated for possible replacement only as it nears the end of its useful life.

Which of the following costs is an example of a batch-level cost?

Select the correct statement regarding quantitative and qualitative information.

The management practice that increases profitability through the management of bottlenecks is known as:

Sunk costs:

Which of the following items is qualitative?

The practice of relaxing constraints is likely to increase a business's profitability.

Select the term from the list provided that best matches each of the following descriptions.Put the number of the term in the column for Your Answer.

Select the correct statement regarding relevant costs and revenues.

Which of the following statements is incorrect?

Only variable costs are relevant for decision making.

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