Question 1

Indicate whether each of the following statements is true or false.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 2

Outdoor Living Company has just received a special order for 500 hammocks.Outdoor Living has sufficient idle capacity to accept the order.Accepting the order will increase Outdoor Living's variable manufacturing costs.Which type of cost is considered a sunk cost to Outdoor Living's decision whether to accept or reject the special order?

Accepted Answer

A)  Raw materials to make the 500 hammocks 
B)  Labor cost to make the 500 hammocks 
C)  Depreciation on equipment that would be used to make the hammocks 
D)  Materials handling cost 
A)  Raw materials to make the 500 hammocks 
B)  Labor cost to make the 500 hammocks 
C)  Depreciation on equipment that would be used to make the hammocks 
D)  Materials handling cost

Question 3

What is a segment elimination decision? Under what conditions should a company decide to eliminate a segment?

Accepted Answer

A segment elimination decision is a dec

Question 4

Stephenson Company is trying to decide which one of two contracts it will accept.The costs and revenues associated with each are listed below: $\begin{array}{lrr}
&\text { Contract X}&\text { Contract Z}\
\text { Contract Revenue } & \$ 200,000 & \$ 260,000 \
\text { Materials } & 10,000& 10,000 \
\text { Labor } & 88,000& 120,000 \
\text { Depreciation on Equipment } & 8,000 & 10,000 \
\text { Cost Incurred for Consulting Advice } & 1,500 & 1,500 \
\text { Allocated Portion of Overhead } & 5,000 & 3,000
\end{array}$ The equipment was purchased last year and has no resale value.Which of these amounts is relevant for the selection of one contract over another?

Accepted Answer

A)  Contract revenue and labor costs 
B)  Materials, consulting advice, and allocated overhead 
C)  Cost of consulting advice and allocated overhead 
D)  Contract revenue, labor costs, and depreciation on equipment 
A)  Contract revenue and labor costs 
B)  Materials, consulting advice, and allocated overhead 
C)  Cost of consulting advice and allocated overhead 
D)  Contract revenue, labor costs, and depreciation on equipment

Question 5

Select the correct statement regarding relevant revenues.

Accepted Answer

A)  Relevant revenues must not differ among the alternatives being considered. 
B)  Past or future revenues may be relevant. 
C)  Relevant revenues must make a difference in the decision under consideration. 
D)  Revenues are not considered relevant in the same way as relevant costs. 
A)  Relevant revenues must not differ among the alternatives being considered. 
B)  Past or future revenues may be relevant. 
C)  Relevant revenues must make a difference in the decision under consideration. 
D)  Revenues are not considered relevant in the same way as relevant costs.

Question 6

All of the following are examples of product-level costs except:

Accepted Answer

A)  product inspection costs. 
B)  product advertising costs. 
C)  engineering design costs. 
D)  patent costs. 
A)  product inspection costs. 
B)  product advertising costs. 
C)  engineering design costs. 
D)  patent costs.

Question 7

Groove Music Company produces compact discs of background music for restaurants and other retail shops.Its disc recording machines are capable of producing 50 discs per hour.The unit-related cost of producing the discs is $2.00.The discs sell for $10.00 each.Mood Music Co.has asked the company to produce 10,000 copies of a disc for $9.00.Groove Music estimates that for this special order the unit-related cost of producing the disc will be $4.00 and that,due to the unique nature of the recording,its machines will only be able to produce 20 discs per hour.Groove Music has a total of 5,000 machine hours of capacity.In addition,to accept the special order,Groove Music will have to lease an additional special-purpose machine that will cost $6,500.
Required:
Assume that existing demand for Groove Music's compact discs is 200,000 units and that the special order has to be either taken in full or rejected.Prepare an analysis that indicates whether or not the special order should be accepted.

Accepted Answer

None

Question 8

Which costs are relevant for equipment replacement decisions?

Accepted Answer

A)  Unit-level costs 
B)  Batch-level costs 
C)  Product-level costs 
D)  All of these answers are correct. 
A)  Unit-level costs 
B)  Batch-level costs 
C)  Product-level costs 
D)  All of these answers are correct.

Question 9

The Mighty Music Company produces and sells a desktop speaker for $100.The company has the capacity to produce 50,000 speakers each period.At capacity,the costs assigned to each unit are as follows: $\begin{array}{lrr}
\text { Unit level costs } & \$  45 \
\text { Product level costs } & \$  15 \
\text { Facility level costs } & \$  5
\end{array}$ The company has received a special order for 500 speakers.If this order is accepted,the company will have to spend $15,000 on additional costs.Assuming that no sales to regular customers will be lost if the order is accepted,at what selling price will the company be indifferent between accepting and rejecting the special order?

Accepted Answer

A)  $95 
B)  $45 
C)  $75 
D)  $60 
A)  $95 
B)  $45 
C)  $75 
D)  $60

Question 10

The Mendez Company is trying to decide whether to replace a packing machine that it uses to pack salsa into individual serving size packages.The following information is provided:
 $\begin{array}{lrr}
\text { Current machine: }\
 \text {Original cost  } &\$26,000\
 \text { Accumulated depreciation } &16,000\
 \text {Annual operating costs  } &4,000\
 \text {Current salvage value  } &4,000\
 \text {Salvage value at the end of five vears  } &1,000\
\
\text { New machine: }\
 \text { Cost } &\$16,000\
 \text {  Annual operating costs} &1,000\
 \text {  Salvage value at the end of five years} &1,000\

\end{array}$
 Required:
1)Compute the increase or decrease in total net income over the five-year period if the company chooses to buy the new machine.
2)Compute the impact on the company's net income in the first year if the current machine is replaced.Do not take depreciation into account.
3)Under what circumstances might a manager not take the action that is in the best interest of the firm in the long run?

Accepted Answer

1)Increase or decrease in income:
2)Firs

Question 11

Indicate whether each of the following statements is true or false.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 12

A company that is subject to the effect of a scarce resource should concentrate on providing products or services that give the greatest contribution margin per unit of product or service.

Accepted Answer

A) True 
 B)False

Question 13

Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):

Accepted Answer

A)  outsourcing decision. 
B)  special order decision. 
C)  segment elimination decision. 
D)  asset replacement decision. 
A)  outsourcing decision. 
B)  special order decision. 
C)  segment elimination decision. 
D)  asset replacement decision.

Question 14

The costs and revenues associated with two alternatives are listed below: $$\begin{array} { l r r } 
& \text { Alternative } 1 & \text { Alternative } 2 \
\text { Projected reveruse } & \$ 100,000 & \$ 125,000 \
\text { Unit-level costs } & 20,000 & 30,000 \
\text { Batch-level costs } & 20,000 & 25,000 \
\text { Product-level costs } & 15,000 & 15,000 \
\text { Facility-level costs } & 10,000 & 10,000
\end{array}$$ Which alternative should be selected based on this information?

Accepted Answer

A)  Alternative 2 because it has a higher profit. 
B)  Alternative 2 because it has the same product- and facility-level costs. 
C)  Alternative 1 because it has fewer unit-level costs. 
D)  Alternative 1 because it has a higher profit. 
A)  Alternative 2 because it has a higher profit. 
B)  Alternative 2 because it has the same product- and facility-level costs. 
C)  Alternative 1 because it has fewer unit-level costs. 
D)  Alternative 1 because it has a higher profit.

Question 15

Match between columns
                        Premises:  Future oriented costs that differ between business alternatives
 Costs that can be avoided when a product line or type of service is eliminated
 Costs that are incurred each time a company makes a single product or performs a single service
 Features such as company reputation, welfare of employees, and customer reaction
 Items that are future oriented and that differ between the alternatives
 Setting a selling price low enough to lure customers away from competitors
 Costs that are not relevant for decision making
 Costs that, for example, would include the cost of selling up machinery to produce a specific lot of units
 The $20 variation between Alternative A, which costs $100 and Alternative B. winch costs $80
 Revenues or cost savings that are sacrified when one alternative is chosen over another
 Deciding to purchase a component that until now has been produced in house.
 Future costs that do not have to be incurred if a specified course of action is taken

Accepted Answer

The Answer of Avoidable costs and Batch-level costs and Differential is...

Question 16

Benitez Company currently outsources a relay switch that is a component in one of its products.The switches cost $20 each.The company is considering making the switches internally at the following projected annual production costs: $\begin{array}{ll}
\text { Unit-level material cost } & \$3 \
\text { Unit-level labor cost } & \$2 \
\text { Unit-level overhead } & \$1 \
\text { Batch-level set-up cost (5,000 units per batch) } & \$ 25,000 \
\text { Product-level supervisory salaries } & \$ 37,500 \
\text { Allocated facility-level costs } & \$ 20,000
\end{array}$  The company expects an annual need for 5,000 switches.If the company makes the product,it will have to utilize factory space currently being leased to another company for $1,500 a month.If the company decides to make the parts,total costs will be:

Accepted Answer

A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased. 
A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased.

Question 17

Ethan paid $3 for a bottle of ThirstAid.Later,while on a hiking trip,he was offered $8 for the ThirstAid.Select the correct statement from the following:

Accepted Answer

A)  The $8 offer is not relevant if Ethan refuses to sell the ThirstAid. 
B)  If Ethan drinks the ThirstAid, no opportunity cost is associated with his decision. 
C)  The $3 original purchase price is irrelevant to his decision to sell the ThirstAid. 
D)  All of these answers are correct. 
A)  The $8 offer is not relevant if Ethan refuses to sell the ThirstAid. 
B)  If Ethan drinks the ThirstAid, no opportunity cost is associated with his decision. 
C)  The $3 original purchase price is irrelevant to his decision to sell the ThirstAid. 
D)  All of these answers are correct.

Question 18

The Clock Builder makes grandfather clock kits that it sells to hobbyists who then assemble and finish the clocks.The company has the capacity to make 5,000 of the kits,and its current volume is 3,000 kits.The costs of a clock kit are $300 for unit-level materials,$200 for unit-level labor,and $150 for an allocation of facility-level overhead.The normal selling price is $950.The Clock Builder has received a special order for 600 clock kits at a price of $600 each.
Required:
Should The Clock Builder accept the special order? Support your answer with appropriate computations.

Accepted Answer

The special order co

Question 19

Indicate whether each of the following statements about outsourcing decisions is true or false.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 20

Bates Golf Supply produces a golf bag that sells for $220.Although the company's production capacity is 5,000 bags per year,only 4,000 bags are currently being produced and sold.The production costs for 4,000 bags are as follows:
 $$\begin{array} { l r } 
\text { Unit-level material cost } & \$ 300,000 \
\text { Unit-level labor cost } & 240,000 \
\text { Unit-level overhead } & 75,000 \
\text { Batch-level setup costs (500 units per batch) } & 16,000 \
\text { Product-level costs } & 20,000 \
\text { Allocated facility-level costs } & 25,000
\end{array}$$ Golf Mart Stores has offered to purchase 1,000 golf bags as a one-time special purchase at a price of $170 per bag.
Required:
1)Prepare a quantitative analysis that indicates whether the special order should be accepted.
2)What qualitative factors should be considered in this special order decision?

Accepted Answer

1)Evaluation of special order:
2)Qualita

Indicate whether each of the following statements is true or false.

What is a segment elimination decision? Under what conditions should a company decide to eliminate a segment?

Select the correct statement regarding relevant revenues.

All of the following are examples of product-level costs except:

Which costs are relevant for equipment replacement decisions?

Indicate whether each of the following statements is true or false.

A company that is subject to the effect of a scarce resource should concentrate on providing products or services that give the greatest contribution margin per unit of product or service.

Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):

Ethan paid $3 for a bottle of ThirstAid.Later,while on a hiking trip,he was offered $8 for the ThirstAid.Select the correct statement from the following:

Indicate whether each of the following statements about outsourcing decisions is true or false.

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 6: Relevant Information for Special Decisions

Indicate whether each of the following statements is true or false.

What is a segment elimination decision? Under what conditions should a company decide to eliminate a segment?

Select the correct statement regarding relevant revenues.

All of the following are examples of product-level costs except:

Which costs are relevant for equipment replacement decisions?

Indicate whether each of the following statements is true or false.

A company that is subject to the effect of a scarce resource should concentrate on providing products or services that give the greatest contribution margin per unit of product or service.

Pilot Motors Corporation is an automobile manufacturer.The company produces its own motors,tires,and other automobile parts.Pilot has the opportunity to purchase tires from another manufacturer instead of producing the tires in its own facility.This type of decision is typically known as a(n):

Ethan paid $3 for a bottle of ThirstAid.Later,while on a hiking trip,he was offered $8 for the ThirstAid.Select the correct statement from the following:

Indicate whether each of the following statements about outsourcing decisions is true or false.

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters