Question 1

An example of an expansion constraint would be the size of the available labor pool.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

Which would be a consideration for making special orders?

Accepted Answer

A) Available capacity to fill the order 
B) If price will cover incremental costs of filling the order 
C) If the order will affect regular sales in the long run 
D) All of the above 
A) Available capacity to fill the order 
B) If price will cover incremental costs of filling the order 
C) If the order will affect regular sales in the long run 
D) All of the above

Question 5

If the expected increase in revenues from a special order is greater than the expected increase in variable and fixed costs, then the special order should be accepted.

Accepted Answer

A) True 
 B)False

Question 6

Jackie has the following information to evaluate-her current salary of $74,000 versus total revenues of $120,000and expenses of $67,000 from starting a new business. How much is the opportunity cost associated with staying at her current job?

Accepted Answer

A) $53,000 
B) $187,000 
C) $74,000 
D) $7000 
A) $53,000 
B) $187,000 
C) $74,000 
D) $7000

Question 7

Lie Around Furniture manufactures two products: Couches and Beds. The following data are available:   The company can manufacture 4 couches per machine hour and 2 beds per machine hour. The company's production capacity is 10,100 machine hours per month.
What is the contribution margin per machine hour for couches?

Accepted Answer

A) $3640 
B) $520 
C) $130 
D) $780 
A) $3640 
B) $520 
C) $130 
D) $780

Question 8

When setting prices, a company need not consider whether it is a price-taker or a price-setter for each product that it sells.

Accepted Answer

A) True 
 B)False

Question 9

Methods for a company to meet target total cost and the profit goals if the current cost of the product is higher than the target cost include which of the following?

Accepted Answer

A) Accept a lower profit 
B) Cut fixed costs, cut variable costs 
C) Cut fixed costs 
D) Any of the above 
A) Accept a lower profit 
B) Cut fixed costs, cut variable costs 
C) Cut fixed costs 
D) Any of the above

Question 10

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

Accepted Answer

A) Increase $92,500 
B) Increase $265,000 
C) Increase $110,500 
D) Decrease $92,500 
A) Increase $92,500 
B) Increase $265,000 
C) Increase $110,500 
D) Decrease $92,500

Question 11

Four Guys Company has in its inventory 5100 paired at a cost of $45,000 and sold for $79,000. What is the opportunity cost of selling the televisions in their present condition?

Accepted Answer

A) $90,000 
B) $124,000 
C) $34,000 
D) $80,000 
A) $90,000 
B) $124,000 
C) $34,000 
D) $80,000

Question 12

Mission Company has three product lines: D, E, and F. The following information is available:   Mission Company is thinking of discontinuing product line F because it is reporting an operating loss. All fixed costs are unavoidable. Mission Company discontinues product line F and rents the space formerly used to produce product F for $18,000 per year, what affect will this have on operating income?

Accepted Answer

A) Increase $27,000 
B) Increase $10,000 
C) Decrease $10,000 
D) Increase $33,000 
A) Increase $27,000 
B) Increase $10,000 
C) Decrease $10,000 
D) Increase $33,000

Question 13

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 14

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 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

The maximum outsourcing price a company is willing to pay can be found by solving for the company's indifference point.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The format of the income statement most useful in decision-making is which of the following?

Accepted Answer

A) Absorption costing format 
B) Traditional format 
C) Contribution margin format 
D) Single-step format 
A) Absorption costing format 
B) Traditional format 
C) Contribution margin format 
D) Single-step format

Question 19

Sky High Seats 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 3000 seats at a price of $330 per unit, and fixed costs increase by $13,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

Accepted Answer

A) Decrease by $77,000 
B) Increase by $227,000 
C) Increase by $90,000 
D) Increase by $77,000 
A) Decrease by $77,000 
B) Increase by $227,000 
C) Increase by $90,000 
D) Increase by $77,000

Question 20

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

Accepted Answer

A) True 
 B)False

An example of an expansion constraint would be the size of the available labor pool.

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

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

Which would be a consideration for making special orders?

If the expected increase in revenues from a special order is greater than the expected increase in variable and fixed costs, then the special order should be accepted.

Jackie has the following information to evaluate-her current salary of $74,000 versus total revenues of $120,000and expenses of $67,000 from starting a new business. How much is the opportunity cost associated with staying at her current job?

When setting prices, a company need not consider whether it is a price-taker or a price-setter for each product that it sells.

Methods for a company to meet target total cost and the profit goals if the current cost of the product is higher than the target cost include which of the following?

Four Guys Company has in its inventory 5100 paired at a cost of $45,000 and sold for $79,000. What is the opportunity cost of selling the televisions in their present condition?

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

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

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

The maximum outsourcing price a company is willing to pay can be found by solving for the company's indifference point.

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

The format of the income statement most useful in decision-making is which of the following?

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

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 Evalulation

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

An example of an expansion constraint would be the size of the available labor pool.

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

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

Which would be a consideration for making special orders?

If the expected increase in revenues from a special order is greater than the expected increase in variable and fixed costs, then the special order should be accepted.

Jackie has the following information to evaluate-her current salary of $74,000 versus total revenues of $120,000and expenses of $67,000 from starting a new business. How much is the opportunity cost associated with staying at her current job?

When setting prices, a company need not consider whether it is a price-taker or a price-setter for each product that it sells.

Methods for a company to meet target total cost and the profit goals if the current cost of the product is higher than the target cost include which of the following?

Four Guys Company has in its inventory 5100 paired at a cost of $45,000 and sold for $79,000. What is the opportunity cost of selling the televisions in their present condition?

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

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

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

The maximum outsourcing price a company is willing to pay can be found by solving for the company's indifference point.

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

The format of the income statement most useful in decision-making is which of the following?

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

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 Evalulation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters