Question 1

When setting prices,managers need to consider all costs.

Accepted Answer

A) True 
 B)False

Question 2

Outsourcing decisions are sometimes referred to as

Accepted Answer

A) make-or-buy decisions. 
B) make decisions. 
C) buy decisions. 
D) none of the above. 
A) make-or-buy decisions. 
B) make decisions. 
C) buy decisions. 
D) none of the above.

Question 3

An "opportunity cost" is best described by which of the following?

Accepted Answer

A) Benefits foregone by choosing a particular alternative course of action 
B) Costs that were incurred in the past and cannot be changed 
C) The distribution of all products to be sold 
D) Expected future costs that differ among alternatives 
A) Benefits foregone by choosing a particular alternative course of action 
B) Costs that were incurred in the past and cannot be changed 
C) The distribution of all products to be sold 
D) Expected future costs that differ among alternatives

Question 4

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:
 
Assume Cruise Company can purchase 6,000 units of the part from Suri Company for $14.00 each,and the facilities currently used to make the part could be used to manufacture 6,000 units of another product that would have an $8 per unit contribution margin.If no additional fixed costs would be incurred,what should Cruise Company do?

Accepted Answer

A) Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit. 
B) Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit. 
C) Continue to make the part to earn an extra $2.00 per unit contribution to profit. 
D) Continue to make the part to earn an extra $4.00 per unit contribution to profit. 
A) Make the new product and buy the part to earn an extra $5.00 per unit contribution to profit. 
B) Make the new product and buy the part to earn an extra $6.00 per unit contribution to profit. 
C) Continue to make the part to earn an extra $2.00 per unit contribution to profit. 
D) Continue to make the part to earn an extra $4.00 per unit contribution to profit.

Question 5

In pricing a product,managers should consider which of the following?

Accepted Answer

A) Only fixed costs 
B) Only variable costs 
C) Only period costs 
D) None of the above 
A) Only fixed costs 
B) Only variable costs 
C) Only period costs 
D) None of the above

Question 6

For some merchandisers,the primary constraint may be cubic feet of display space.

Accepted Answer

A) True 
 B)False

Question 7

Benace Parts and Supply makes a variety of car parts.The company produces 6,000 A90 parts each year.Each A90 sells for $7 and has a contribution margin of $2.Currently,$16,000 of fixed manufacturing overhead is allocated to the A90 product line.If Benace Parts and Supply discontinues the A90 product line,$7,000 of fixed manufacturing overhead costs would be avoided.What would be the impact on total operating income if the A90 product line were to be discontinued?

Accepted Answer

A) Increase in total operating income of $5,000 
B) Decrease in total operating income of $5,000 
C) Increase in total operating income of $4,000 
D) Decrease in total operating income of $4,000 
A) Increase in total operating income of $5,000 
B) Decrease in total operating income of $5,000 
C) Increase in total operating income of $4,000 
D) Decrease in total operating income of $4,000

Question 8

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow:
 
If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line,how will operating income be affected?

Accepted Answer

A) Decrease $30,000 
B) Increase $10,000 
C) Increase $69,000 
D) Increase $128,000 
A) Decrease $30,000 
B) Increase $10,000 
C) Increase $69,000 
D) Increase $128,000

Question 9

Contribution margin income statement data for the most recent year follow:
 
Assuming the Dog food line is discontinued,total fixed costs remain unchanged,and the space formerly used to produce the Dog food line is used to double the production of Cat food,how will operating income be affected?

Accepted Answer

A) Increase $90,000 
B) Increase $246,000 
C) Increase $168,000 
D) Decrease $90,000 
A) Increase $90,000 
B) Increase $246,000 
C) Increase $168,000 
D) Decrease $90,000

Question 10

"Contribution margin per unit" is best described by which of the following?

Accepted Answer

A) Sales price per unit minus fixed cost per unit 
B) Sales price per unit minus variable cost unit 
C) Sales price per unit minus fixed and variable costs per unit 
D) Units sold time contribution margin ratio 
A) Sales price per unit minus fixed cost per unit 
B) Sales price per unit minus variable cost unit 
C) Sales price per unit minus fixed and variable costs per unit 
D) Units sold time contribution margin ratio

Question 11

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow:
 
If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line,how will operating income be affected?

Accepted Answer

A) Increase $5,000 
B) Decrease $45,000 
C) Increase $54,000 
D) Increase $103,000 
A) Increase $5,000 
B) Decrease $45,000 
C) Increase $54,000 
D) Increase $103,000

Question 12

Sky High Seats manufactures seats for airplanes.The company has the capacity to produce 100,000 seats per year,but currently produces and sells 75,000 seats per year.The following information relates to the current production of the product:
 
If a special sales order is accepted for 7,000 seats at a price of $350 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) Increase by $560,000 
B) Decrease by $560,000 
C) Increase by $2,450,000 
D) Increase by $8,000,000 
A) Increase by $560,000 
B) Decrease by $560,000 
C) Increase by $2,450,000 
D) Increase by $8,000,000

Question 13

Managers should consider which of the following when deciding whether to outsource a product or service?

Accepted Answer

A) Quality of the product or service 
B) Delivery schedule of the product or service 
C) Cost charged for the product or service 
D) All of the above 
A) Quality of the product or service 
B) Delivery schedule of the product or service 
C) Cost charged for the product or service 
D) All of the above

Question 14

Companies often try to gain more control over pricing by attempting to differentiate their products.

Accepted Answer

A) True 
 B)False

Question 15

Mountaintop golf course is planning for the coming season.Investors would like to earn a 12% return on the company's $45 million of assets.The company primarily incurs fixed costs to groom the greens and fairways.Fixed costs are projected to be $20,000,000 for the golfing season.About 400,000 golfers are expected each year.Variable costs are about $15 per golfer.Mountaintop golf course is a price-taker and won't be able to charge more than its competitors who charge $75 per round of golf.What profit will it earn as a percent of assets?

Accepted Answer

A) Loss of 8.89% 
B) Profit of 35.56% 
C) Profit of 8.89% 
D) Loss of 57.67% 
A) Loss of 8.89% 
B) Profit of 35.56% 
C) Profit of 8.89% 
D) Loss of 57.67%

Question 16

Managers need to consider variable costs,fixed costs,inventoriable product costs and period costs when setting prices.

Accepted Answer

A) True 
 B)False

Question 17

A "constraint" is best described by which of the following?

Accepted Answer

A) The distribution of all products to be sold 
B) A factor that restricts production or sales of a product 
C) Benefits foregone by choosing a particular alternative course of action 
D) Expected future costs that differ among alternatives 
A) The distribution of all products to be sold 
B) A factor that restricts production or sales of a product 
C) Benefits foregone by choosing a particular alternative course of action 
D) Expected future costs that differ among alternatives

Question 18

The income statement for Lovely Locks is divided by its two product lines,Curling Irons and Straighteners,as follows:
 
If Lovely Locks can eliminate fixed costs of $32,000 by discontinuing the Straightener line,then discontinuing it should result in which of the following?

Accepted Answer

A) Increase in total operating income of $50,000 
B) Decrease in total operating income of $18,000 
C) Increase in total operating income of $18,000 
D) Decrease in total operating income of $50,000 
A) Increase in total operating income of $50,000 
B) Decrease in total operating income of $18,000 
C) Increase in total operating income of $18,000 
D) Decrease in total operating income of $50,000

Question 19

All of the following are relevant to the decision to replace equipment except the

Accepted Answer

A) cost of old equipment. 
B) selling price of old equipment. 
C) future maintenance costs of old equipment. 
D) cost of new equipment. 
A) cost of old equipment. 
B) selling price of old equipment. 
C) future maintenance costs of old equipment. 
D) cost of new equipment.

Question 20

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow:
 
Assuming the Sporty line is discontinued,total fixed costs remain unchanged,and the space formerly used to produce the Sporty line is used to increase the production of Luxury watches by 250%,how will operating income be affected?

Accepted Answer

A) Increase $299,500 
B) Increase $177,500 
C) Increase $236,500 
D) Decrease $177,500 
A) Increase $299,500 
B) Increase $177,500 
C) Increase $236,500 
D) Decrease $177,500

When setting prices,managers need to consider all costs.

Outsourcing decisions are sometimes referred to as

An "opportunity cost" is best described by which of the following?

In pricing a product,managers should consider which of the following?

For some merchandisers,the primary constraint may be cubic feet of display space.

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow: If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line,how will operating income be affected?

Contribution margin income statement data for the most recent year follow: Assuming the Dog food line is discontinued,total fixed costs remain unchanged,and the space formerly used to produce the Dog food line is used to double the production of Cat food,how will operating income be affected?

"Contribution margin per unit" is best described by which of the following?

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow: If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line,how will operating income be affected?

Managers should consider which of the following when deciding whether to outsource a product or service?

Companies often try to gain more control over pricing by attempting to differentiate their products.

Managers need to consider variable costs,fixed costs,inventoriable product costs and period costs when setting prices.

A "constraint" is best described by which of the following?

The income statement for Lovely Locks is divided by its two product lines,Curling Irons and Straighteners,as follows: If Lovely Locks can eliminate fixed costs of $32,000 by discontinuing the Straightener line,then discontinuing it should result in which of the following?

All of the following are relevant to the decision to replace equipment except the

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

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Exam 8: Relevant Costs for Short-Term Decisions

When setting prices,managers need to consider all costs.

Outsourcing decisions are sometimes referred to as

An "opportunity cost" is best described by which of the following?

In pricing a product,managers should consider which of the following?

For some merchandisers,the primary constraint may be cubic feet of display space.

Westfall Watches has two product lines: Luxury watches and Sporty watches.Income statement data for the most recent year follow: If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line,how will operating income be affected?

Contribution margin income statement data for the most recent year follow: Assuming the Dog food line is discontinued,total fixed costs remain unchanged,and the space formerly used to produce the Dog food line is used to double the production of Cat food,how will operating income be affected?

"Contribution margin per unit" is best described by which of the following?

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow: If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line,how will operating income be affected?

Managers should consider which of the following when deciding whether to outsource a product or service?

Companies often try to gain more control over pricing by attempting to differentiate their products.

Managers need to consider variable costs,fixed costs,inventoriable product costs and period costs when setting prices.

A "constraint" is best described by which of the following?

The income statement for Lovely Locks is divided by its two product lines,Curling Irons and Straighteners,as follows: If Lovely Locks can eliminate fixed costs of $32,000 by discontinuing the Straightener line,then discontinuing it should result in which of the following?

All of the following are relevant to the decision to replace equipment except the

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