Question 1

A manager should always reject a special order if

Accepted Answer

A) the special order price is less than the variable costs of the order. 
B) there is available excess capacity. 
C) the special order price is less than the regular sales price. 
D) the special order will require variable nonmanufacturing expenses. 
A) the special order price is less than the variable costs of the order. 
B) there is available excess capacity. 
C) the special order price is less than the regular sales price. 
D) the special order will require variable nonmanufacturing expenses.

Question 2

Silvio Enterprises produces three products,with costs and selling prices as follows:  
Each product requires a certain number of minutes on the drill press.There is only one drill press available so it is the constraint for this product.Model D7 requires 2 minutes of drill press time,Model B3 requires 1 minute of drill press time,and Model F5 requires 7 minutes of drill press time.In what order should Silvio Enterprises emphasize its products to maximize its contribution margin? (Rank the products in order from most profitable to least profitable. )

Accepted Answer

A) Model B3,Model D7,Model F5 
B) Model B3,Model F5,Model D7 
C) Model D7,Model B3,Model F5 
D) Model F5,Model D7,Model B3 
A) Model B3,Model D7,Model F5 
B) Model B3,Model F5,Model D7 
C) Model D7,Model B3,Model F5 
D) Model F5,Model D7,Model B3

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 QR?

Accepted Answer

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

Question 4

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.
To maximize profits,what product and how many units should the company produce in a month?

Accepted Answer

A) 3,600 Coffee Makers and 0 Waffle Makers 
B) 300 Waffle Makers and 675 Coffee Makers 
C) 2,400 Waffle Makers and 3,600 Coffee Makers 
D) 2,400 Waffle Makers and 0 Coffee Makers 
A) 3,600 Coffee Makers and 0 Waffle Makers 
B) 300 Waffle Makers and 675 Coffee Makers 
C) 2,400 Waffle Makers and 3,600 Coffee Makers 
D) 2,400 Waffle Makers and 0 Coffee Makers

Question 5

Companies operating in highly competitive industries are generally price-setters.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are product mix considerations except

Accepted Answer

A) What constraint(s)stops us from making (or displaying)all of the units we can sell? 
B) Which products offer the highest contribution margin per unit of the constraint? 
C) Would emphasizing one product over another affect fixed costs? 
D) Which product has the most sunk costs? 
A) What constraint(s)stops us from making (or displaying)all of the units we can sell? 
B) Which products offer the highest contribution margin per unit of the constraint? 
C) Would emphasizing one product over another affect fixed costs? 
D) Which product has the most sunk costs?

Question 7

Fixed costs that may be avoided in the future are referred to as

Accepted Answer

A) relevant costs. 
B) opportunity costs. 
C) replacement costs. 
D) sunk costs. 
A) relevant costs. 
B) opportunity costs. 
C) replacement costs. 
D) sunk costs.

Question 8

A joint production process at Happy Days Farms results in two products,blackberry syrup and blackberry jam.The following cost and activity data relate to these two products:
 
Blackberry syrup can be sold as-is (at the split-off point)for $2.50 per unit,or it can be processed further into a specialty blackberry juice and then sold for $5.00 per unit.If blackberry syrup is processed further into the specialty blackberry juice,what would be the overall effect on operating income?

Accepted Answer

A) $1,750 net increase in operating income 
B) $1,750 net decrease in operating income 
C) $3,750 net increase in operating income 
D) $3,750 net decrease in operating income 
A) $1,750 net increase in operating income 
B) $1,750 net decrease in operating income 
C) $3,750 net increase in operating income 
D) $3,750 net decrease in operating income

Question 9

A constraint is a factor that restricts production or sale of a product.

Accepted Answer

A) True 
 B)False

Question 10

When making product mix decisions,companies are most profitable when they maximize production of the product with the greatest sales demand.

Accepted Answer

A) True 
 B)False

Question 11

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow:
 
Assuming fixed costs remain unchanged,how would discontinuing the Fashion line affect operating income?

Accepted Answer

A) Increase in total operating income of $29,000 
B) Increase in total operating income of $132,000 
C) Decrease in total operating income of $78,000 
D) Decrease in total operating income of $20,000 
A) Increase in total operating income of $29,000 
B) Increase in total operating income of $132,000 
C) Decrease in total operating income of $78,000 
D) Decrease in total operating income of $20,000

Question 12

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.Green Pastures golf course is a price-taker and won't be able to charge more than $60 per round because of local competition.
What will Green Pasture's revenue be at a market price of $60/round?

Accepted Answer

500,000 go

Question 13

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:
 
If a special sales order is accepted for 2,500 seats at a price of $310 per unit,fixed costs increase by $6,500,and variable marketing and administrative costs for that order are $25 per unit,how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order. )

Accepted Answer

A) Increase by $218,500 
B) Decrease by $156,000 
C) Increase by $162,500 
D) Increase by $156,000 
A) Increase by $218,500 
B) Decrease by $156,000 
C) Increase by $162,500 
D) Increase by $156,000

Question 14

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.Assuming Black Productions discontinues line F and is able to double the production and sales of model E without increasing fixed costs.What effect will this have on operating income?

Accepted Answer

A) Increase $10,000 
B) Decrease $10,000 
C) Increase $26,000 
D) Decrease $26,000 
A) Increase $10,000 
B) Decrease $10,000 
C) Increase $26,000 
D) Decrease $26,000

Question 15

What is the difference between relevant and irrelevant information for making decisions.Provide examples of each.

Accepted Answer

Relevant information affects a decision

Question 16

If a company decides to outsource and then has freed capacity,the decision on what to do with that freed capacity would be based upon

Accepted Answer

A) avoidable fixed costs. 
B) opportunity costs. 
C) unavoidable fixed costs. 
D) none of the above. 
A) avoidable fixed costs. 
B) opportunity costs. 
C) unavoidable fixed costs. 
D) none of the above.

Question 17

Fixed costs that are allocated among all departments are known as

Accepted Answer

A) direct fixed costs. 
B) relevant fixed costs. 
C) general fixed costs. 
D) common fixed costs. 
A) direct fixed costs. 
B) relevant fixed costs. 
C) general fixed costs. 
D) common fixed costs.

Question 18

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.
By what percent would Heinz Manufacturing's operating income improve if the change is made?

Accepted Answer

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

Question 19

If the cost savings from discontinuing a product exceed the lost revenues from discontinuing the product,it should be retained.

Accepted Answer

A) True 
 B)False

Question 20

All of the following factors affect the amount a customer is willing to pay for a product,except

Accepted Answer

A) the selling company's costs. 
B) the competition's price. 
C) the product's uniqueness. 
D) general economic conditions. 
A) the selling company's costs. 
B) the competition's price. 
C) the product's uniqueness. 
D) general economic conditions.

A manager should always reject a special order if

Companies operating in highly competitive industries are generally price-setters.

All of the following are product mix considerations except

Fixed costs that may be avoided in the future are referred to as

A constraint is a factor that restricts production or sale of a product.

When making product mix decisions,companies are most profitable when they maximize production of the product with the greatest sales demand.

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow: Assuming fixed costs remain unchanged,how would discontinuing the Fashion line affect operating income?

What is the difference between relevant and irrelevant information for making decisions.Provide examples of each.

If a company decides to outsource and then has freed capacity,the decision on what to do with that freed capacity would be based upon

Fixed costs that are allocated among all departments are known as

If the cost savings from discontinuing a product exceed the lost revenues from discontinuing the product,it should be retained.

All of the following factors affect the amount a customer is willing to pay for a product,except

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

A manager should always reject a special order if

Companies operating in highly competitive industries are generally price-setters.

All of the following are product mix considerations except

Fixed costs that may be avoided in the future are referred to as

A constraint is a factor that restricts production or sale of a product.

When making product mix decisions,companies are most profitable when they maximize production of the product with the greatest sales demand.

Boots Plus has two product lines: Hiking boots and Fashion boots.Income statement data for the most recent year follow: Assuming fixed costs remain unchanged,how would discontinuing the Fashion line affect operating income?

What is the difference between relevant and irrelevant information for making decisions.Provide examples of each.

If a company decides to outsource and then has freed capacity,the decision on what to do with that freed capacity would be based upon

Fixed costs that are allocated among all departments are known as

If the cost savings from discontinuing a product exceed the lost revenues from discontinuing the product,it should be retained.

All of the following factors affect the amount a customer is willing to pay for a product,except

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