Question 1

Which of the following is not a cost concept commonly used in applying the cost-plus approach to product pricing?

Accepted Answer

A)  total cost concept 
B)  product cost concept 
C)  variable cost concept 
D)  fixed cost concept 
A)  total cost concept 
B)  product cost concept 
C)  variable cost concept 
D)  fixed cost concept

Question 2

Assuming that Widgeon Co.can sell all of the products it can make,what is the maximum contribution margin it can earn per month?

Accepted Answer

A)  $49,000 
B)  $70,000 
C)  $56,000 
D)  $34,000 
A)  $49,000 
B)  $70,000 
C)  $56,000 
D)  $34,000

Question 3

Match the definitions that follow with the term (a-e)it defines.
-Only includes the costs of manufacturing in product cost per unit

Accepted Answer

A) Demand-based concept 
B) Competition-based concept 
C) Product cost concept 
D) Target costing 
E) Production bottleneck
   
A) Demand-based concept 
B) Competition-based concept 
C) Product cost concept 
D) Target costing 
E) Production bottleneck

Question 4

In addition to the differential costs in an equipment-replacement decision,the remaining useful life of the old equipment and the estimated life of the new equipment are important considerations.

Accepted Answer

A) True 
 B)False

Question 5

What is the activity rate for production setup?

Accepted Answer

A)  $2,500 per setup 
B)  $833 per setup 
C)  $625 per setup 
D)  $400 per setup 
A)  $2,500 per setup 
B)  $833 per setup 
C)  $625 per setup 
D)  $400 per setup

Question 6

Jarrett Company is considering a cash outlay of $300,000 for the purchase of land,which it could lease out for $36,000 per year.If alternative investments are available that yield a 9% return,the opportunity cost of the purchase of the land is

Accepted Answer

A)  $27,000 
B)  $36,000 
C)  $9,000 
D)  $72,000 
A)  $27,000 
B)  $36,000 
C)  $9,000 
D)  $72,000

Question 7

The Turtle Company has total estimated factory overhead for the year of $1,200,000,divided into four activities: fabrication,$600,000; assembly,$240,000; setup,$200,000; and materials handling,$160,000.Turtle manufactures two products,Boogie Boards and Surf Boards.The activity-base usage quantities for each product by each activity are as follows:
​
   Each product is budgeted for 10,000 units of production for the year.Determine (a)the activity rates for each activity and (b)the factory overhead cost per unit for each product using activity-based costing.

Accepted Answer

(a)Fabrication: $600,000 / 40,

Question 8

What is the contribution margin per machine hour for Bales?

Accepted Answer

A)  $5 
B)  $7 
C)  $35 
D)  $28 
A)  $5 
B)  $7 
C)  $35 
D)  $28

Question 9

Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further,these costs are not considered in deciding whether to further process a product.

Accepted Answer

A) True 
 B)False

Question 10

What is the amount of income or loss from acceptance of the offer?

Accepted Answer

A)  $97,500 income 
B)  $94,500 loss 
C)  $37,500 income 
D)  $37,500 loss 
A)  $97,500 income 
B)  $94,500 loss 
C)  $37,500 income 
D)  $37,500 loss

Question 11

Assume that Widgeon produced enough product with the highest contribution margin per unit to use 1,000 hours of machine time.Product demand does not warrant any more production of that product.What is the maximum additional contribution margin that can be realized by utilizing the remaining 1,000 hours on the product with the second highest contribution margin per hour?

Accepted Answer

A)  $35,000 
B)  $7,000 
C)  $4,000 
D)  $28,000 
A)  $35,000 
B)  $7,000 
C)  $4,000 
D)  $28,000

Question 12

A cost that will not be affected by later decisions is termed a sunk cost.

Accepted Answer

A) True 
 B)False

Question 13

What is the differential cost from the acceptance of the offer?

Accepted Answer

A)  $200,000 
B)  $262,500 
C)  $85,500 
D)  $165,000 
A)  $200,000 
B)  $262,500 
C)  $85,500 
D)  $165,000

Question 14

What is the contribution per machine hour for Wales?

Accepted Answer

A)  $35 
B)  $28 
C)  $17 
D)  $7 
A)  $35 
B)  $28 
C)  $17 
D)  $7

Question 15

Should the special order be accepted?

Accepted Answer

A)  cannot determine from the data given 
B)  yes 
C)  no 
D)  there would be no difference in accepting or rejecting the special order 
A)  cannot determine from the data given 
B)  yes 
C)  no 
D)  there would be no difference in accepting or rejecting the special order

Question 16

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit.The unit cost for the business to make the part is $20,including fixed costs,and $11,not including fixed costs.If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity,what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

Accepted Answer

A)  $150,000 cost increase 
B)  $120,000 cost decrease 
C)  $150,000 cost increase. 
D)  $120,000 cost increase 
A)  $150,000 cost increase 
B)  $120,000 cost decrease 
C)  $150,000 cost increase. 
D)  $120,000 cost increase

Question 17

If the order is accepted,what would be the impact on net income?

Accepted Answer

A)  decrease of $750 
B)  decrease of $4,500 
C)  increase of $3,000 
D)  increase of $1,500 
A)  decrease of $750 
B)  decrease of $4,500 
C)  increase of $3,000 
D)  increase of $1,500

Question 18

Which of the following reasons would cause a company to reject an offer to accept business at a special price?

Accepted Answer

A)  The additional sale will not conflict with regular sales. 
B)  The additional sales will increase differential income. 
C)  The additional sales will not increase fixed expenses. 
D)  The additional sales will increase fixed expenses. 
A)  The additional sale will not conflict with regular sales. 
B)  The additional sales will increase differential income. 
C)  The additional sales will not increase fixed expenses. 
D)  The additional sales will increase fixed expenses.

Question 19

The amount of income that would result from an alternative use of cash is called:

Accepted Answer

A)  differential income 
B)  sunk cost 
C)  differential revenue 
D)  opportunity cost 
A)  differential income 
B)  sunk cost 
C)  differential revenue 
D)  opportunity cost

Question 20

Differential revenue is the amount of income that would result from the best available alternative proposed use of cash.

Accepted Answer

A) True 
 B)False

Exam 24: Differential Analysis and Product Pricing

Which of the following is not a cost concept commonly used in applying the cost-plus approach to product pricing?

Assuming that Widgeon Co.can sell all of the products it can make,what is the maximum contribution margin it can earn per month?

Match the definitions that follow with the term (a-e)it defines. -Only includes the costs of manufacturing in product cost per unit

In addition to the differential costs in an equipment-replacement decision,the remaining useful life of the old equipment and the estimated life of the new equipment are important considerations.

What is the activity rate for production setup?

Jarrett Company is considering a cash outlay of $300,000 for the purchase of land,which it could lease out for $36,000 per year.If alternative investments are available that yield a 9% return,the opportunity cost of the purchase of the land is

What is the contribution margin per machine hour for Bales?

Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further,these costs are not considered in deciding whether to further process a product.

What is the amount of income or loss from acceptance of the offer?

A cost that will not be affected by later decisions is termed a sunk cost.

What is the differential cost from the acceptance of the offer?

What is the contribution per machine hour for Wales?

Should the special order be accepted?

If the order is accepted,what would be the impact on net income?

Which of the following reasons would cause a company to reject an offer to accept business at a special price?

The amount of income that would result from an alternative use of cash is called:

Differential revenue is the amount of income that would result from the best available alternative proposed use of cash.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current,installment Notes,and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

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