Question 1

A sunk cost will change with a future course of action.

Accepted Answer

A) True 
 B)False

Question 2

Rosie's Company has three products,P1,P2,and P3.The maximum Rosie's can sell is 65,000 units of P1,24,000 units of P2,and 12,000 units of P3.Rosie's has limited production capacity of 9,000 hours.It can produce 12 units of P1,6 units of P2,and 3 units of P3 per hour.Contribution margin per unit is $5 for the P1,$15 for the P2,and $25 for the P3.What is the most profitable sales mix for Rosie's Company?

Accepted Answer

A) 12,000 P1,24,000 P2,12,000 P3. 
B) 10,800 P1,24,000 P2,12,000 P3. 
C) 12,000 P1,20,000 P2,1,200 P3. 
D) 16,800 P1,20,000 P2,12,000 P3. 
E) 10,800 P1,25,000 P2,10,800 P3. 
A) 12,000 P1,24,000 P2,12,000 P3. 
B) 10,800 P1,24,000 P2,12,000 P3. 
C) 12,000 P1,20,000 P2,1,200 P3. 
D) 16,800 P1,20,000 P2,12,000 P3. 
E) 10,800 P1,25,000 P2,10,800 P3.

Question 3

The total cost method determines a selling price equal to a product's total costs plus a desired profit on the product.

Accepted Answer

A) True 
 B)False

Question 4

Elliot Company can sell all of its products A and Z that it can produce,but it has limited production capacity.It can produce 8 units of A per hour or 10 units of Z per hour,and it has 20,000 production hours available.Contribution margin per unit is $12 for A and $10 for Z.What is the most profitable sales mix for Elliot Company?

Accepted Answer

A) 84,000 units of A and 60,000 units of Z. 
B) 48,000 units of A and 80,000 units of Z. 
C) 60,000 units of A and 100,000 units of Z. 
D) 120,000 units of A and 0 units of Z. 
E) 0 units of A and 200,000 units of Z. 
A) 84,000 units of A and 60,000 units of Z. 
B) 48,000 units of A and 80,000 units of Z. 
C) 60,000 units of A and 100,000 units of Z. 
D) 120,000 units of A and 0 units of Z. 
E) 0 units of A and 200,000 units of Z.

Question 5

Assume markup percentage equals desired profit divided by total costs.What is the correct calculation to determine the dollar amount of the markup per unit?

Accepted Answer

A) Total cost times markup percentage. 
B) Total cost per unit times markup percentage per unit. 
C) Total cost per unit divided by markup percentage per unit. 
D) Markup percentage per unit divided by total cost per unit. 
E) Markup percentage divided by total cost. 
A) Total cost times markup percentage. 
B) Total cost per unit times markup percentage per unit. 
C) Total cost per unit divided by markup percentage per unit. 
D) Markup percentage per unit divided by total cost per unit. 
E) Markup percentage divided by total cost.

Question 6

Shale Remodeling uses time and materials pricing.It is setting prices for next year using the following information:   What should Shale set as the materials markup per dollar of materials used?

Accepted Answer

A) 25%. 
B) 45%. 
C) 40%. 
D) 20%. 
E) 50%. 
A) 25%. 
B) 45%. 
C) 40%. 
D) 20%. 
E) 50%.

Question 7

An additional cost incurred only if a company pursues a particular course of action is a(n):

Accepted Answer

A) Period cost. 
B) Pocket cost. 
C) Discount cost. 
D) Incremental cost. 
E) Sunk cost. 
A) Period cost. 
B) Pocket cost. 
C) Discount cost. 
D) Incremental cost. 
E) Sunk cost.

Question 8

JK Company can sell all of the plush and supreme products it can produce,but it has limited production capacity.It can produce 4 plush units per hour or 2 supreme units per hour,and it has 2,000 production hours available.Contribution margin per unit is $214 for the plush product and $300 for the supreme product.What is the most profitable sales mix for JK Company?

Accepted Answer

A) 0 plush units and 4,000 supreme units. 
B) 4,000 plush units and 4,000 supreme units. 
C) 8,000 plush units and 0 supreme units. 
D) 8,000 plush units and 4,000 supreme units. 
E) 4,000 plush units and 2,000 supreme units. 
A) 0 plush units and 4,000 supreme units. 
B) 4,000 plush units and 4,000 supreme units. 
C) 8,000 plush units and 0 supreme units. 
D) 8,000 plush units and 4,000 supreme units. 
E) 4,000 plush units and 2,000 supreme units.

Question 9

Carly's Clips charges for their grooming services based on the following: $$\begin{array}{l}
\begin{array} { l  l r } 
\text {Direct labor rate} &\$ 60 per hour\
\text {Materials markup}&30 \%\
\end{array}
\end{array}$$ Using time and materials pricing,what is the total price for a job requiring 3 direct labor hours and $50 of materials?

Accepted Answer

A) $195. 
B) $230. 
C) $245. 
D) $180. 
E) $250. 
A) $195. 
B) $230. 
C) $245. 
D) $180. 
E) $250.

Question 10

Bricktan Inc.makes three products,basic,classic,and deluxe.The maximum Bricktan can sell is 715,000 units of basic,420,000 units of classic,and 120,000 units of deluxe.Bricktan has limited production capacity of 90,000 hours.It can produce 10 units of basic,8 units of classic,and 4 units of deluxe per hour.Contribution margin per unit is $15 for the basic,$25 for the classic,and $55 for the deluxe.What is the most profitable sales mix for Bricktan Inc.?

Accepted Answer

A) 71,500 basic,420,000 classic and 240,000 deluxe. 
B) 150,000 basic,120,000 classic and 240,000 deluxe. 
C) 300,000 basic,240,000 classic and 120,000 deluxe. 
D) 600,000 basic,0 classic and 120,000 deluxe. 
E) 75,000 basic,420,000 classic and 120,000 deluxe. 
A) 71,500 basic,420,000 classic and 240,000 deluxe. 
B) 150,000 basic,120,000 classic and 240,000 deluxe. 
C) 300,000 basic,240,000 classic and 120,000 deluxe. 
D) 600,000 basic,0 classic and 120,000 deluxe. 
E) 75,000 basic,420,000 classic and 120,000 deluxe.

Question 11

Riener Hospital has an x-ray machine with a book value of $60,000 and a remaining useful life of three years.At the end of the three years the equipment will have a zero salvage value.The market value of the equipment is currently $32,000.Riener can purchase a new machine for $145,000 and receive $28,000 in return for trading in its old machine.The new machine will reduce variable manufacturing costs by $27,000 per year over the three-year life of the new machine.The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money)is:

Accepted Answer

A) $22,000 decrease 
B) $76,000 increase 
C) $18,000 decrease 
D) $52,000 increase 
E) $22,000 increase 
A) $22,000 decrease 
B) $76,000 increase 
C) $18,000 decrease 
D) $52,000 increase 
E) $22,000 increase

Question 12

A company has the choice of either selling 600 apples or processing them into applesauce.The company could sell the apples as they are for $2.00 per unit.Alternatively,each apple could be made into one unit of applesauce with incremental costs of $0.60 per unit for direct materials,$1.00 per unit for direct labor,and $0.80 per unit for overhead,and then sold for $5.00 each.
-What is the amount of incremental income (loss)from processing the apples into applesauce?

Accepted Answer

A) $3.00 per unit. 
B) $(3.00)per unit. 
C) $7.00 per unit. 
D) $(0.60)per unit. 
E) $0.60 per unit. 
A) $3.00 per unit. 
B) $(3.00)per unit. 
C) $7.00 per unit. 
D) $(0.60)per unit. 
E) $0.60 per unit.

Question 13

A company has the choice of either selling 1,000 unfinished units as is or completing them.The company could sell the unfinished units as is for $4.00 per unit.Alternatively,it could complete the units with incremental costs of $1.00 per unit for direct materials,$2.00 per unit for direct labor,and $1.50 per unit for overhead,and then sell the finished units for $8.00 each.What should the company do?

Accepted Answer

A) Sell the units as is. 
B) Finish the units. 
C) It does not matter because both alternatives have the same result. 
D) Neither sell nor finish because both alternatives produce a loss.Instead,the company should store the units permanently. 
E) Donate the units. 
A) Sell the units as is. 
B) Finish the units. 
C) It does not matter because both alternatives have the same result. 
D) Neither sell nor finish because both alternatives produce a loss.Instead,the company should store the units permanently. 
E) Donate the units.

Question 14

Mays Company can sell all of product A that it produces but only 160,000 units of product Z.The company has limited production capacity.It can produce 6 units of A per hour or 10 units of Z per hour,and it has 30,000 production hours available.Contribution margin per unit is $12 for A and $10 for Z.What is the most profitable sales mix for this company?

Accepted Answer

@#IMG-DLM&
Because Product Z yields the higher con

Question 15

Markson Company had the following results of operations for the past year: $\begin{array}{lrr}
\text { Sales }(8,000 \text { units at } \$ 20) & & \$ 160,000 \
\text { Variable manufacturing costs } & \$ 86,000 & \
\text { Fixed manufacturing costs } & 15,000 & \
\text { Variable administrative expenses } & 12,000 & \
\text { Fixed selling and administrative expenses } & 20,000 & (133,000)\
\hline\text {Operating income}&&\$ 27,000 \
\hline
\end{array}$ A foreign company offers to buy 2,000 units at $14 per unit.In addition to variable manufacturing and administrative costs,selling these units would increase fixed overhead by $1,600 for the purchase of special tools.Markson's annual productive capacity is 12,000 units.If Markson accepts this additional business,its profits will:

Accepted Answer

A) Increase by $3,500. 
B) Decrease by $5,650. 
C) Decrease by $1,600. 
D) Increase by $1,900. 
E) Decrease by $5,100. 
A) Increase by $3,500. 
B) Decrease by $5,650. 
C) Decrease by $1,600. 
D) Increase by $1,900. 
E) Decrease by $5,100.

Question 16

Jaybird Company operates in a highly competitive market where the market price for its product is $50 per unit.Jaybird desires a $15 profit per unit.Jaybird expects to sell 5,000 units.Additional information is as follows: $$\begin{array}{l}
\begin{array} { l  l r } 
\text { Variable product cost per unit}&\$15\
\text { Variable administrative cost per unit}&10\
\text { Total fixed overhead}&45,000\
\text { Total fixed administrative}&18,000
\end{array}
\end{array}$$To achieve the target cost per unit,Jaybird must reduce total expenses by how much?

Accepted Answer

A) $14,500 
B) $3,500 
C) $23,000 
D) $20,000 
E) $13,000 
A) $14,500 
B) $3,500 
C) $23,000 
D) $20,000 
E) $13,000

Question 17

The concept of incremental cost is the same as the concept of differential cost.

Accepted Answer

A) True 
 B)False

Question 18

Spilker Linens Store has three departments: Bath,Kitchen,and Bedding.The most recent income statement,showing the total operating profit and departmental results is shown below:
  Based on this income statement,management is planning on eliminating the Bedding department,as it is generating a net loss.If the Bedding department is eliminated,the Kitchen department will expand to fill the space,but sales will not change in total,nor will direct expenses.None of Bedding's allocated expenses will be avoided,but they will be reallocated to Bath and Kitchen.Bath will be allocated $100,000 additional expenses,and Kitchen will be allocated $75,000 additional expenses.Prepare a new income statement for Spilker Linens Store,showing the results if the Bedding Department is eliminated and indicate whether eliminating the department is advisable.

Accepted Answer

@#IMG-DLM& 
Based on this analysis,the B

Question 19

Janko Wellspring Inc.has a pump with a book value of $24,000 and a four-year remaining life.A new,more efficient pump,is available at a cost of $45,000.Janko can also receive $8,000 for trading in the old pump.The new pump will reduce variable costs by $10,000 per year over its four-year life.The costs not relevant to the decision of whether or not to replace the pump are:

Accepted Answer

A) $40,000. 
B) $8,000. 
C) $10,000. 
D) $24,000. 
E) $16,000. 
A) $40,000. 
B) $8,000. 
C) $10,000. 
D) $24,000. 
E) $16,000.

Question 20

Shale Remodeling uses time and materials pricing.It is setting prices for next year using the following information:   What should Shale set as rate per hour of labor hour?

Accepted Answer

A) $250. 
B) $200. 
C) $150. 
D) $225. 
E) $180. 
A) $250. 
B) $200. 
C) $150. 
D) $225. 
E) $180.

A sunk cost will change with a future course of action.

The total cost method determines a selling price equal to a product's total costs plus a desired profit on the product.

Assume markup percentage equals desired profit divided by total costs.What is the correct calculation to determine the dollar amount of the markup per unit?

Shale Remodeling uses time and materials pricing.It is setting prices for next year using the following information: What should Shale set as the materials markup per dollar of materials used?

An additional cost incurred only if a company pursues a particular course of action is a(n):

Carly's Clips charges for their grooming services based on the following: Direct labor rate \ 60perhour Materials markup 30\% Using time and materials pricing,what is the total price for a job requiring 3 direct labor hours and $50 of materials?

The concept of incremental cost is the same as the concept of differential cost.

Shale Remodeling uses time and materials pricing.It is setting prices for next year using the following information: What should Shale set as rate per hour of labor hour?

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

Exam 23: Relevant Costing for Managerial Decisions

A sunk cost will change with a future course of action.

The total cost method determines a selling price equal to a product's total costs plus a desired profit on the product.

Assume markup percentage equals desired profit divided by total costs.What is the correct calculation to determine the dollar amount of the markup per unit?

Shale Remodeling uses time and materials pricing.It is setting prices for next year using the following information: What should Shale set as the materials markup per dollar of materials used?

An additional cost incurred only if a company pursues a particular course of action is a(n):

Carly's Clips charges for their grooming services based on the following: Direct labor rate \ 60perhour Materials markup 30\% Using time and materials pricing,what is the total price for a job requiring 3 direct labor hours and $50 of materials?

The concept of incremental cost is the same as the concept of differential cost.

Shale Remodeling uses time and materials pricing.It is setting prices for next year using the following information: What should Shale set as rate per hour of labor hour?

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters