Question 1

A "sales mix" is best described by which of the following?

Accepted Answer

A) A factor that restricts production or sales of a product 
B) Costs that were incurred in the past and cannot be changed 
C) Expected future costs that differ among alternatives 
D) The relative number of all products to be sold 
A) A factor that restricts production or sales of a product 
B) Costs that were incurred in the past and cannot be changed 
C) Expected future costs that differ among alternatives 
D) The relative number of all products to be sold

Question 2

Relevant information is expected future data that will not differ among alternatives.

Accepted Answer

A) True 
 B)False

Question 3

In deciding whether to accept a special sales order,any fixed costs that would remain unchanged are considered relevant data.

Accepted Answer

A) True 
 B)False

Question 4

Define the term constraints and give an example.What product should be made first when resource constraints exist?

Accepted Answer

Constraints are the limited resources th

Question 5

Mama's Favorite Appliances manufactures two products: Food Processors and Espresso Makers.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 ratio for food processors?

Accepted Answer

A) 60.00% 
B) 150.00% 
C) 140.00% 
D) 33.33% 
A) 60.00% 
B) 150.00% 
C) 140.00% 
D) 33.33%

Question 6

In a special sales order decision,the special price must exceed the variable cost of filling the order.In other words,the special order must have

Accepted Answer

A) sunk costs. 
B) a positive contribution margin. 
C) opportunity costs. 
D) a negative contribution margin. 
A) sunk costs. 
B) a positive contribution margin. 
C) opportunity costs. 
D) a negative contribution margin.

Question 7

Variable costs are irrelevant to a special decision when those variable costs differ between alternatives.

Accepted Answer

A) True 
 B)False

Question 8

Part P40 is a part used in the production of air conditioners at Jackson Corporation.The following costs and data relate to the production of Part P40:
 
Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,50% of the fixed costs would be avoided.If Jackson Corporation makes the part,how much will its operating income be?

Accepted Answer

A) $47,500 greater than if the company bought the part 
B) $20,000 greater than if the company bought the part 
C) $7,500 greater than if the company bought the part 
D) $32,500 less than if the company bought the part 
A) $47,500 greater than if the company bought the part 
B) $20,000 greater than if the company bought the part 
C) $7,500 greater than if the company bought the part 
D) $32,500 less than if the company bought the part

Question 9

All About Animals has two product lines: Cat food and Dog food.Contribution margin income statement data for the most recent year follow:
 
Assuming total fixed costs remain unchanged,how would discontinuing the Dog food line affect operating income?

Accepted Answer

A) Increase in total operating income of $33,000 
B) Increase in total operating income of $159,000 
C) Decrease in total operating income of $45,000 
D) Decrease in total operating income of $111,000 
A) Increase in total operating income of $33,000 
B) Increase in total operating income of $159,000 
C) Decrease in total operating income of $45,000 
D) Decrease in total operating income of $111,000

Question 10

Brittany Furniture manufactures two products: Futons and Recliners.The following data are available:
 
The company can manufacture two futons per machine hour and one recliner 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) 900 recliners 
B) 1,800 futons and 900 recliners 
C) 1,800 futons 
D) 700 futons and 360 recliners 
A) 900 recliners 
B) 1,800 futons and 900 recliners 
C) 1,800 futons 
D) 700 futons and 360 recliners

Question 11

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 1,000 units at a sale price of $40 per product? The special order units would not require any variable selling and administrative expenses.

Accepted Answer

A) Decrease by $18,000 
B) Decrease by $19,500 
C) Increase by $18,000 
D) Increase by $19,500 
A) Decrease by $18,000 
B) Decrease by $19,500 
C) Increase by $18,000 
D) Increase by $19,500

Question 12

Blue Technologies manufactures and sells DVD players.Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players.Blue Technologies' normal selling price is $30 per DVD player.The total manufacturing cost per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player.(NOTE: Assume excess capacity and no effect on regular sales. )
How much are the expected increase (decrease)in revenues and expenses from the special sales order?

Accepted Answer

A) Expected increase in revenues $220,000;expected increase in expenses $140,000 
B) Expected increase in revenues $220,000;expected increase in expenses $40,000 
C) Expected increase in revenues $300,000;expected increase in expenses $140,000 
D) Expected increase in revenues $220,000;expected increase in expenses $120,000 
A) Expected increase in revenues $220,000;expected increase in expenses $140,000 
B) Expected increase in revenues $220,000;expected increase in expenses $40,000 
C) Expected increase in revenues $300,000;expected increase in expenses $140,000 
D) Expected increase in revenues $220,000;expected increase in expenses $120,000

Question 13

A "relevant cost" is best described by which of the following?

Accepted Answer

A) A factor that restricts production or sales of a product 
B) Cost of developing,producing,and delivering a product or service 
C) Costs that were incurred in the past and cannot be changed 
D) Expected future costs that differ among alternatives 
A) A factor that restricts production or sales of a product 
B) Cost of developing,producing,and delivering a product or service 
C) Costs that were incurred in the past and cannot be changed 
D) Expected future costs that differ among alternatives

Question 14

Fixed costs that exist even after a product is discontinued are called unavoidable fixed costs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following describes the products and services of companies that are price-setters?

Accepted Answer

A) They tend to be unique. 
B) They are priced by managers using a target-costing emphasis. 
C) They tend to have a lot of competitors. 
D) They tend to be commodities. 
A) They tend to be unique. 
B) They are priced by managers using a target-costing emphasis. 
C) They tend to have a lot of competitors. 
D) They tend to be commodities.

Question 16

Cornell Enterprises currently produces several products.Model L78 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31.   
You have been hired by Cornell Enterprises to help analyze the decision as to whether to eliminate Model L78.Upon investigation,you discover that if Model L78 is eliminated,$20,000 of the fixed costs shown on the above condensed income statement can be eliminated.The rest of the fixed costs allocated to Model L78 are common fixed costs that will be allocated to the remaining two products produced by Cornell Enterprises.
Determine if Cornell Enterprises should discontinue Model L78.

Accepted Answer

@#IMG-DLM& Cornell Enterprises should no

Question 17

One cost that is irrelevant in decision making is a sunk cost.

Accepted Answer

A) True 
 B)False

Question 18

The following information relates to current production of outdoor chaise lounges Backyard Posh:
 
The regular selling price per chaise lounge is $300.00.The company is analyzing the opportunity to accept a special sales order for 200 chaise lounges at a price of $200.00 per unit.Fixed costs would increase by $20,000.The company has the capacity to produce 15,000 chaise lounges per year,but is currently producing and selling 10,000 chaise lounges per year.Regular sales will not be affected by the special order.If the company were to accept this special order,how would operating income be affected?

Accepted Answer

A) Decrease by $6,400 
B) Increase by $13,600 
C) Decrease by $13,600 
D) Increase by $6,400 
A) Decrease by $6,400 
B) Increase by $13,600 
C) Decrease by $13,600 
D) Increase by $6,400

Question 19

Which of the following would be a consideration for "sell as is or process further" decisions?

Accepted Answer

A) Revenue generated if sold "as is" 
B) Revenue generated if "further processed" 
C) Costs involved in further processing 
D) All of the above 
A) Revenue generated if sold "as is" 
B) Revenue generated if "further processed" 
C) Costs involved in further processing 
D) All of the above

Question 20

Comfort Cloud manufactures seats for airplanes.The company has the capacity to produce 100,000 seats per year,but is currently produces and sells 75,000 seats per year.The following information relates to current production of seats:
 
If a special sales order is accepted for 6,500 seats at a price of $325 per unit,and fixed costs remain unchanged,how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order. )

Accepted Answer

A) Decrease by $357,500 
B) Increase by $357,500 
C) Increase by $2,112,500 
D) Increase by $5,500,000 
A) Decrease by $357,500 
B) Increase by $357,500 
C) Increase by $2,112,500 
D) Increase by $5,500,000

A "sales mix" is best described by which of the following?

Relevant information is expected future data that will not differ among alternatives.

In deciding whether to accept a special sales order,any fixed costs that would remain unchanged are considered relevant data.

Define the term constraints and give an example.What product should be made first when resource constraints exist?

In a special sales order decision,the special price must exceed the variable cost of filling the order.In other words,the special order must have

Variable costs are irrelevant to a special decision when those variable costs differ between alternatives.

All About Animals has two product lines: Cat food and Dog food.Contribution margin income statement data for the most recent year follow: Assuming total fixed costs remain unchanged,how would discontinuing the Dog food line affect operating income?

A "relevant cost" is best described by which of the following?

Fixed costs that exist even after a product is discontinued are called unavoidable fixed costs.

Which of the following describes the products and services of companies that are price-setters?

One cost that is irrelevant in decision making is a sunk cost.

Which of the following would be a consideration for "sell as is or process further" 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

A "sales mix" is best described by which of the following?

Relevant information is expected future data that will not differ among alternatives.

In deciding whether to accept a special sales order,any fixed costs that would remain unchanged are considered relevant data.

Define the term constraints and give an example.What product should be made first when resource constraints exist?

In a special sales order decision,the special price must exceed the variable cost of filling the order.In other words,the special order must have

Variable costs are irrelevant to a special decision when those variable costs differ between alternatives.

All About Animals has two product lines: Cat food and Dog food.Contribution margin income statement data for the most recent year follow: Assuming total fixed costs remain unchanged,how would discontinuing the Dog food line affect operating income?

A "relevant cost" is best described by which of the following?

Fixed costs that exist even after a product is discontinued are called unavoidable fixed costs.

Which of the following describes the products and services of companies that are price-setters?

One cost that is irrelevant in decision making is a sunk cost.

Which of the following would be a consideration for "sell as is or process further" 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