Question 1

When making outsourcing (make-or-buy)decisions,the focus is on how best to use available resources.

Accepted Answer

A) True 
 B)False

Question 2

The benefit foregone by choosing a particular alternative course of action is referred to as a(n)

Accepted Answer

A) sunk cost. 
B) opportunity cost. 
C) variable cost. 
D) incremental cost. 
A) sunk cost. 
B) opportunity cost. 
C) variable cost. 
D) incremental cost.

Question 3

Pluto Incorporated provided the following information regarding its single product:
 
The regular selling price for the product is $80.The annual quantity of units produced and sold is 40,000 units (the costs above relate to the 40,000 units production level).The company has excess capacity and regular sales will not be affected by this special order.There was no beginning inventory.
What would be the effect on operating income of accepting a special order for 3,500 units at a sale price of $55 per product?

Accepted Answer

A) Increase by $115,500 
B) Increase by $269,500 
C) Decrease by $115,500 
D) Decrease by $269,500 
A) Increase by $115,500 
B) Increase by $269,500 
C) Decrease by $115,500 
D) Decrease by $269,500

Question 4

Changing the product mix emphasis in the short run will usually not affect

Accepted Answer

A) total variable costs. 
B) both total variable and total fixed costs. 
C) total fixed costs. 
D) total contribution margin. 
A) total variable costs. 
B) both total variable and total fixed costs. 
C) total fixed costs. 
D) total contribution margin.

Question 5

Cruise Company produces a part that is used in the manufacture of one of its products.The unit manufacturing costs of this part,assuming a production level of 6,000 units,are as follows:
 
Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $14 each,and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year,what should Cruise Company do?

Accepted Answer

A) Make the part and save $6.00 per unit. 
B) Make the part and save $2.00 per unit. 
C) Buy the part and save $2.00 per unit. 
D) Buy the part and save $1.00 per unit. 
A) Make the part and save $6.00 per unit. 
B) Make the part and save $2.00 per unit. 
C) Buy the part and save $2.00 per unit. 
D) Buy the part and save $1.00 per unit.

Question 6

Which of the following pairs are characteristics of price-setters?

Accepted Answer

A) Less competition and target costing 
B) Cost-plus pricing and less competition 
C) Lack of product uniqueness and heavy competition 
D) Less competition and lack of product uniqueness 
A) Less competition and target costing 
B) Cost-plus pricing and less competition 
C) Lack of product uniqueness and heavy competition 
D) Less competition and lack of product uniqueness

Question 7

Mama's Favorite Appliances manufactures two products: Food Processors and Espresso Machines.The following data are available:
 
The company can manufacture two food processors per machine hour and three espresso machines per machine hour.The company's production capacity is 1,200 machine hours per month.
To maximize profits,what product and how many units should the company produce in a month?

Accepted Answer

A) 2,400 Food Processors and 0 Espresso Machines 
B) 300 Food Processors and 675 Espresso Machines 
C) 2,400 Food Processors and 3,600 Espresso Machines 
D) 3,600 Espresso Machines and 0 Food Processors 
A) 2,400 Food Processors and 0 Espresso Machines 
B) 300 Food Processors and 675 Espresso Machines 
C) 2,400 Food Processors and 3,600 Espresso Machines 
D) 3,600 Espresso Machines and 0 Food Processors

Question 8

In most circumstances,all fixed costs can be eliminated by outsourcing a product.

Accepted Answer

A) True 
 B)False

Question 9

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow:
 
Assuming fixed costs remain unchanged,how would discontinuing the Sporty line affect operating income?

Accepted Answer

A) Increase in total operating income of $49,000 
B) Increase in total operating income of $142,000 
C) Decrease in total operating income of $10,000 
D) Decrease in total operating income of $108,000 
A) Increase in total operating income of $49,000 
B) Increase in total operating income of $142,000 
C) Decrease in total operating income of $10,000 
D) Decrease in total operating income of $108,000

Question 10

Mama's Favorite Appliances manufactures two products: Food Processors and Espresso Machines.The following data are available:
 
The company can manufacture two food processors per machine hour and three espresso machines per machine hour.The company's production capacity is 1,200 machine hours per month.
What is the contribution margin per machine hour for food processors?

Accepted Answer

A) $350 
B) $225 
C) $75 
D) $150 
A) $350 
B) $225 
C) $75 
D) $150

Question 11

Jackie has the following information to evaluate-her current salary of $74,000 versus total revenues of $100,000 and expenses of $65,000 from starting a new business.How much is the opportunity cost associated with staying at her current job?

Accepted Answer

A) $35,000 
B) $165,000 
C) $74,000 
D) $(9,000) 
A) $35,000 
B) $165,000 
C) $74,000 
D) $(9,000)

Question 12

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 waffle makers?

Accepted Answer

A) $75 
B) $225 
C) $150 
D) $330 
A) $75 
B) $225 
C) $150 
D) $330

Question 13

All of the following would be considered in evaluating product or sales mix allocations,except

Accepted Answer

A) deciding which product offers the lowest contribution margin per unit. 
B) deciding whether fixed costs would change as a result of the product sales mix. 
C) deciding upon any and all constraints associated with the product/sale mix. 
D) deciding which products will contribute the highest contribution margin per unit. 
A) deciding which product offers the lowest contribution margin per unit. 
B) deciding whether fixed costs would change as a result of the product sales mix. 
C) deciding upon any and all constraints associated with the product/sale mix. 
D) deciding which products will contribute the highest contribution margin per unit.

Question 14

Jeff's Widget Corporation produces and sells a part used in the production of bicycles.The unit costs associated with this part are as follows:   
Saturn Company has approached Jeff's Widget Corporation with an offer to purchase 20,000 units of this part at a price of $.80.Accepting this special sales order will put idle manufacturing capacity to use and will not affect regular sales.Total fixed costs will not change.
Determine whether or not the special order should be accepted.Justify your conclusion.

Accepted Answer

@#IMG-DLM& The company should accept the

Question 15

From a purely financial standpoint,if a product line has a negative contribution margin,the product line should be discontinued.

Accepted Answer

A) True 
 B)False

Question 16

A drug store decides to discontinue its health and beauty section of products because it has been unprofitable.This strategy could backfire because

Accepted Answer

A) the store can readily fill the available space. 
B) the store's sales may suffer by not having this convenience category of products. 
C) it has automatically saved that department's fixed costs. 
D) none of the above. 
A) the store can readily fill the available space. 
B) the store's sales may suffer by not having this convenience category of products. 
C) it has automatically saved that department's fixed costs. 
D) none of the above.

Question 17

Common fixed costs that are allocated between departments are generally

Accepted Answer

A) direct fixed costs of the department. 
B) relevant to the decision of whether to discontinue the department. 
C) irrelevant to the decision of whether to discontinue the department. 
D) direct fixed costs of other departments. 
A) direct fixed costs of the department. 
B) relevant to the decision of whether to discontinue the department. 
C) irrelevant to the decision of whether to discontinue the department. 
D) direct fixed costs of other departments.

Question 18

When a company is a price-setter,it emphasizes a target costing approach to pricing.

Accepted Answer

A) True 
 B)False

Question 19

In a special sales order decision,incremental fixed costs that will be incurred if the special order is accepted are considered to be

Accepted Answer

A) opportunity costs. 
B) irrelevant to the decision. 
C) relevant to the decision. 
D) sunk costs. 
A) opportunity costs. 
B) irrelevant to the decision. 
C) relevant to the decision. 
D) sunk costs.

Question 20

Moon Appliance manufactures a variety of appliances which all use Part B89.Currently,Moon Appliance manufactures Part B89 in its internal manufacturing process.Moon Appliance produces 9,000 units of Part B89 annually.The annual costs to product Part B89 at the level of 9,000 units include:
 
All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier.Moon Appliance has no alternative use for its manufacturing facilities.Nadal Parts Company has offered to sell 9,000 units of Part B89 to Moon Appliance for $20.00 per unit.What should Moon Appliance do?

Accepted Answer

A) Make the part and save $9 per unit. 
B) Make the part and save $5 per unit. 
C) Buy from Nadal Parts Company and lose $2 per unit. 
D) Make the part and save $13 per unit. 
A) Make the part and save $9 per unit. 
B) Make the part and save $5 per unit. 
C) Buy from Nadal Parts Company and lose $2 per unit. 
D) Make the part and save $13 per unit.

When making outsourcing (make-or-buy)decisions,the focus is on how best to use available resources.

The benefit foregone by choosing a particular alternative course of action is referred to as a(n)

Changing the product mix emphasis in the short run will usually not affect

Which of the following pairs are characteristics of price-setters?

In most circumstances,all fixed costs can be eliminated by outsourcing a product.

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow: Assuming fixed costs remain unchanged,how would discontinuing the Sporty line affect operating income?

Jackie has the following information to evaluate-her current salary of $74,000 versus total revenues of $100,000 and expenses of $65,000 from starting a new business.How much is the opportunity cost associated with staying at her current job?

All of the following would be considered in evaluating product or sales mix allocations,except

From a purely financial standpoint,if a product line has a negative contribution margin,the product line should be discontinued.

A drug store decides to discontinue its health and beauty section of products because it has been unprofitable.This strategy could backfire because

Common fixed costs that are allocated between departments are generally

When a company is a price-setter,it emphasizes a target costing approach to pricing.

In a special sales order decision,incremental fixed costs that will be incurred if the special order is accepted are considered to be

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

When making outsourcing (make-or-buy)decisions,the focus is on how best to use available resources.

The benefit foregone by choosing a particular alternative course of action is referred to as a(n)

Changing the product mix emphasis in the short run will usually not affect

Which of the following pairs are characteristics of price-setters?

In most circumstances,all fixed costs can be eliminated by outsourcing a product.

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow: Assuming fixed costs remain unchanged,how would discontinuing the Sporty line affect operating income?

Jackie has the following information to evaluate-her current salary of $74,000 versus total revenues of $100,000 and expenses of $65,000 from starting a new business.How much is the opportunity cost associated with staying at her current job?

All of the following would be considered in evaluating product or sales mix allocations,except

From a purely financial standpoint,if a product line has a negative contribution margin,the product line should be discontinued.

A drug store decides to discontinue its health and beauty section of products because it has been unprofitable.This strategy could backfire because

Common fixed costs that are allocated between departments are generally

When a company is a price-setter,it emphasizes a target costing approach to pricing.

In a special sales order decision,incremental fixed costs that will be incurred if the special order is accepted are considered to be

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