Question 1

Big-box retailers such as Lowe's are considered price-takers because

Accepted Answer

A) their products are not unique. 
B) there is less competition in the home improvement retail sector. 
C) their products are unique. 
D) they emphasize cost-plus pricing. 
A) their products are not unique. 
B) there is less competition in the home improvement retail sector. 
C) their products are unique. 
D) they emphasize cost-plus pricing.

Question 2

Product differentiation allows companies to become more of a price-setter,and less of a price-taker.

Accepted Answer

A) True 
 B)False

Question 3

Heinz Manufacturing produces Item Q with variable manufacturing costs of $12/unit.The selling price of Item Q is $15/unit.The fixed manufacturing overhead cost is $72,000.A normal production run includes 100,000 units.Heinz Manufacturing has discovered an additional process to change Item Q into Item QR.Additional costs are estimated at $7/unit.Item QR would sell for $24/unit.Additional fixed manufacturing overhead costs of $4,500 would be incurred if Item QR is produced.There would be no change in the number of units produced.
What would be the operating income for Item Q?

Accepted Answer

The answer of Heinz Manufacturing produces Item Q with variable...

Question 4

Brittany Furniture manufactures two products: Couches and Beds.The following data are available:
 
The company can manufacture two couches per machine hour and one bed per machine hour.The company's production capacity is 900 machine hours per month.
To maximize profits,what product and how many units should the company produce in a month?

Accepted Answer

A) 1,800 couches and 900 beds 
B) 900 beds 
C) 1,800 couches 
D) 600 couches and 325 beds 
A) 1,800 couches and 900 beds 
B) 900 beds 
C) 1,800 couches 
D) 600 couches and 325 beds

Question 5

Becky's Bakery produces two products,cake and pie.Becky's Bakery sells each cake for $15.00 and each pie for $10.00.Variable costs for cakes and pies are respectively,$7.00 and $6.00.There are 3,200 direct labor hours per month available for producing one of the two products.Fixed manufacturing overhead cost is allocated at $1,000 per month.Each cake and pie require 2 direct labor hours.
Compute the following:
A.Contribution margin per unit for each product.
B.Contribution margin per direct labor hour for each product.
C.The total number of products produced if only that product is produced each month.
D.Income for a month if only one product is produced and total production is sold.

Accepted Answer

The answer of Becky's Bakery produces two products,cake and pie.Becky's...

Question 6

Green Pastures golf course is planning for the coming season.Investors would like to earn a 12% return on the company's $40 million of assets.The company primarily incurs fixed costs to groom the greens and fairways.Fixed costs are projected to be $20 million for the golfing season.About 500,000 golfers are expected each year.Variable costs are about $12 per golfer.The Green Pastures course has a favorable reputation in the area and therefore,has some control over the price of a round of golf.
Based on these numbers,what are Green Pasture's total costs?

Accepted Answer

$20,000,000 in fixed

Question 7

Bear Country Granola is considering selling premium granola.It already sells regular for $6.75/pound and would sell premium granola for $9.50/pound.The cost for organic grains for the premium granola would be $1.15/pound.A cost that would not be considered in this decision would be

Accepted Answer

A) the extra revenue generated by selling premium. 
B) the cost of refining the regular granola. 
C) the cost of further processing the regular granola into premium granola. 
D) any of the above would be considered. 
A) the extra revenue generated by selling premium. 
B) the cost of refining the regular granola. 
C) the cost of further processing the regular granola into premium granola. 
D) any of the above would be considered.

Question 8

When using a target costing approach,the company starts with revenue at market price,and then subtracts its desired profit,to yield the target total cost.

Accepted Answer

A) True 
 B)False

Question 9

Harvey Automobiles uses a standard part in the manufacture of several of its trucks.The cost of producing 40,000 parts is $120,000,which includes fixed costs of $60,000 and variable costs of $60,000.The company can buy the part from an outside supplier for $3.00 per unit,and avoid 30% of the fixed costs.
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 $12,000 profit.If Harvey Automobiles makes the part,what will its operating income be?

Accepted Answer

A) $54,000 greater than if the company bought the part 
B) $30,000 less than if the company bought the part 
C) $30,000 greater than if the company bought the part 
D) $150,000 greater than if the company bought the part 
A) $54,000 greater than if the company bought the part 
B) $30,000 less than if the company bought the part 
C) $30,000 greater than if the company bought the part 
D) $150,000 greater than if the company bought the part

Question 10

The income statement for Germain Appliances is divided by its two product lines,Toasters and Microwaves,as follows:
 
If Germain Appliances can eliminate fixed costs of $32,000 by discontinuing the Microwave line,then discontinuing it should result in which of the following?

Accepted Answer

A) Increase in total operating income of $45,000 
B) Increase in total operating income of $13,000 
C) Decrease in total operating income of $13,000 
D) Decrease in total operating income of $45,000 
A) Increase in total operating income of $45,000 
B) Increase in total operating income of $13,000 
C) Decrease in total operating income of $13,000 
D) Decrease in total operating income of $45,000

Question 11

Brigg's Breakfast Appliances manufactures two products: Waffle Makers and Coffee Makers.The following data are available:
 
The company can manufacture two waffle makers per machine hour and three coffee makers per machine hour.The company's production capacity is 1,200 machine hours per month.
What is the contribution margin per machine hour for coffee makers?

Accepted Answer

A) $195 
B) $1,095 
C) $130 
D) $65 
A) $195 
B) $1,095 
C) $130 
D) $65

Question 12

Black Productions has three models: D,E,and F.The following information is available:
 
Black Productions is thinking of discontinuing model F because it is reporting an operating loss.All fixed costs are unavoidable.Black Productions discontinues model F and rents the space formerly used to produce product F for $15,000 per year,what effect will this have on operating income?

Accepted Answer

A) Increase $21,000 
B) Increase $5,000 
C) Decrease $21,000 
D) Decrease $5,000 
A) Increase $21,000 
B) Increase $5,000 
C) Decrease $21,000 
D) Decrease $5,000

Question 13

Upscale Dishwear manufactures two products,salad plates and platters,from a joint process.Salad plates are allocated $7,500 of the total joint costs of $25,000.There are 3,000 salad plates produced and 3,000 platters produced each year.Salad plates can be sold at the split-off point for $12 per unit,or they can be hand painted for additional processing costs of $8,400 and sold for $16 for each deluxe salad plate.If the salad plates are processed further and made into deluxe plates,the effect on operating income would be

Accepted Answer

A) $36,000 net increase in operating income. 
B) $3,600 net decrease in operating income. 
C) $36,000 net decrease in operating income. 
D) $3,600 net increase in operating income. 
A) $36,000 net increase in operating income. 
B) $3,600 net decrease in operating income. 
C) $36,000 net decrease in operating income. 
D) $3,600 net increase in operating income.

Question 14

One key to analyzing short-term business decisions is to focus on relevant revenues,costs and profits.

Accepted Answer

A) True 
 B)False

Question 15

The managerial accountant at Coffee and Tea Manufacturing manufactures three different types of coffee for consumers to enjoy in the marketplace.The managerial accountant reported the following information about the cases of coffee products Product A,Product B,and Product C:   
Product A uses 1 machine-hour to produce 1 case of coffee;and,Products B and C use 2 machine hours to produce 1 case of coffee.There are 1,000 available machine hours to produce each product.Calculate the contribution margin per unit,the contribution margin ratio,and the available capacity per machine-hour for each coffee product A,B,and C.

Accepted Answer

Contribution margin per unit and contrib

Question 16

Managers should consider all of the following when deciding whether to accept a special order,except

Accepted Answer

A) available excess capacity. 
B) the variable costs associated with the special order. 
C) the effect of the order on regular sales. 
D) fixed costs that will not be affected by the order. 
A) available excess capacity. 
B) the variable costs associated with the special order. 
C) the effect of the order on regular sales. 
D) fixed costs that will not be affected by the order.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes.The cost of producing 40,000 parts is $138,000,which includes fixed costs of $68,000 and variable costs of $70,000.By outsourcing the part,the company can avoid 30% of the fixed costs.
If Cuyahoga Valley Bicycles buys the part,what is the most Cuyahoga Valley Bicycles can spend per unit so that operating income equals the operating income from making the part?

Accepted Answer

A) $1.33 
B) $2.26 
C) $4.64 
D) $2.33 
A) $1.33 
B) $2.26 
C) $4.64 
D) $2.33

Question 19

A company's manager would consider which of the following in deciding whether to discontinue its
Electronics product line?

Accepted Answer

A) The costs it could save by discontinuing the product line 
B) The revenues it would lose from discontinuing the product line 
C) How discontinuing the electronics product line would affect sales of its other products (like CDs) 
D) All of the above 
A) The costs it could save by discontinuing the product line 
B) The revenues it would lose from discontinuing the product line 
C) How discontinuing the electronics product line would affect sales of its other products (like CDs) 
D) All of the above

Question 20

Qualitative factors play an important part in make or buy decisions.

Accepted Answer

A) True 
 B)False

Big-box retailers such as Lowe's are considered price-takers because

Product differentiation allows companies to become more of a price-setter,and less of a price-taker.

Bear Country Granola is considering selling premium granola.It already sells regular for $6.75/pound and would sell premium granola for $9.50/pound.The cost for organic grains for the premium granola would be $1.15/pound.A cost that would not be considered in this decision would be

When using a target costing approach,the company starts with revenue at market price,and then subtracts its desired profit,to yield the target total cost.

The income statement for Germain Appliances is divided by its two product lines,Toasters and Microwaves,as follows: If Germain Appliances can eliminate fixed costs of $32,000 by discontinuing the Microwave line,then discontinuing it should result in which of the following?

One key to analyzing short-term business decisions is to focus on relevant revenues,costs and profits.

Managers should consider all of the following when deciding whether to accept a special order,except

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

A company's manager would consider which of the following in deciding whether to discontinue its Electronics product line?

Qualitative factors play an important part in make or buy decisions.

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

Big-box retailers such as Lowe's are considered price-takers because

Product differentiation allows companies to become more of a price-setter,and less of a price-taker.

Bear Country Granola is considering selling premium granola.It already sells regular for $6.75/pound and would sell premium granola for $9.50/pound.The cost for organic grains for the premium granola would be $1.15/pound.A cost that would not be considered in this decision would be

When using a target costing approach,the company starts with revenue at market price,and then subtracts its desired profit,to yield the target total cost.

The income statement for Germain Appliances is divided by its two product lines,Toasters and Microwaves,as follows: If Germain Appliances can eliminate fixed costs of $32,000 by discontinuing the Microwave line,then discontinuing it should result in which of the following?

One key to analyzing short-term business decisions is to focus on relevant revenues,costs and profits.

Managers should consider all of the following when deciding whether to accept a special order,except

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

A company's manager would consider which of the following in deciding whether to discontinue its Electronics product line?

Qualitative factors play an important part in make or buy decisions.

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