Question 1

A joint cost is:

Accepted Answer

A)  a cost of a single process that yields two or more products or services simultaneously. 
B)  a cost that is not directly attributable to the production of any specific good or service. 
C)  a cost shared by more than one process in a manufacturing cycle. 
D)  All of the given answers 
A)  a cost of a single process that yields two or more products or services simultaneously. 
B)  a cost that is not directly attributable to the production of any specific good or service. 
C)  a cost shared by more than one process in a manufacturing cycle. 
D)  All of the given answers

Question 2

The term given to the practice of having a process undertaken by an external firm rather than a company doing it itself, is outsourcing.

Accepted Answer

A) True 
 B)False

Question 3

Distinctions between sunk costs and opportunity costs
i. Define sunk costs and opportunity costs.
ii. 'Information about sunk costs generally can be found in the accounting system; however, information about opportunity costs rarely is found in the accounting records.' Do you agree with that statement? Explain why or why not.

Accepted Answer

i. A sunk cost is a cost that has alread

Question 4

A firm incurs manufacturing costs totalling $240 000 in process 1 to produce the following three beverages emerging from that process at the split-off point:
Apple juice: sold immediately it emerges from Process 1 without further processing for $0.70 litre.
Apple cider: processed further in Process 2 at an additional cost of $0.66667 litre, then sold for $1.50 litre.
Apple pulp: processed further in Process 3 at an additional cost of $1.50 litre, then sold for $3.50 litre.
The following data relates to the period in which the joint costs were incurred.  
What is the amount of joint cost that would be allocated to apple juice if the constant gross margin method had been used?

Accepted Answer

A)  $120 000 
B)  $91 000 
C)  $84 000 
D)  $80 000 
A)  $120 000 
B)  $91 000 
C)  $84 000 
D)  $80 000

Question 5

Which of the following is a correct statement regarding the link between decision making and performance evaluation?

Accepted Answer

A)  Managers are rewarded for good decisions; therefore there is always an incentive for mangers to make the best decision for the firm. 
B)  Where managers are rewarded by financial variables such as bottom-line profit, there is often an incentive for managers to avoid a decision that may be in the best interests of the firm but reduce their segment's bottom line. 
C)  Managers can be relied on to always make decisions that are in the interests of the firm as a whole. 
D)  Decision making and performance evaluation are separate issues for the managers of firms and are seldom related. 
A)  Managers are rewarded for good decisions; therefore there is always an incentive for mangers to make the best decision for the firm. 
B)  Where managers are rewarded by financial variables such as bottom-line profit, there is often an incentive for managers to avoid a decision that may be in the best interests of the firm but reduce their segment's bottom line. 
C)  Managers can be relied on to always make decisions that are in the interests of the firm as a whole. 
D)  Decision making and performance evaluation are separate issues for the managers of firms and are seldom related.

Question 6

What term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?

Accepted Answer

A)  Qualitative 
B)  Quantitative 
C)  Sensitive 
D)  Uncertain 
A)  Qualitative 
B)  Quantitative 
C)  Sensitive 
D)  Uncertain

Question 7

The joint cost allocation method that ensures that the gross margin for each product is identical is the:

Accepted Answer

A)  relative sales value method. 
B)  net realisable value method. 
C)  joint cost allocation method. 
D)  constant gross margin method. 
A)  relative sales value method. 
B)  net realisable value method. 
C)  joint cost allocation method. 
D)  constant gross margin method.

Question 8

Zoota Ltd makes four products: Alta, Bepha, Delma and Gamta. The selling price and per unit costs are show below.  
*Alta and Delma share the same factory; therefore, monthly rent is allocated equally between the two products. Other allocated monthly fixed costs include administrative costs, which are allocated based on a $2/unit charge.
Zoota Ltd decides to drop Delma because it is unprofitable. Christina Bobo, the management accountant of Zoota Ltd, suggests that by dropping Delma the company can save $1 x 5000 = $5000 a month. Your assessment of Christina's suggestion is:

Accepted Answer

A)  Christina is correct in her quantitative assessment; although she needs to also consider the qualitative factors. 
B)  Christina is incorrect because by dropping Delma, the company actually loses $3 per unit. 
C)  Christina is incorrect, because by dropping Delma, the company actually loses $1 per unit. 
D)  Christina is incorrect, because Delma is currently at break-even point. 
A)  Christina is correct in her quantitative assessment; although she needs to also consider the qualitative factors. 
B)  Christina is incorrect because by dropping Delma, the company actually loses $3 per unit. 
C)  Christina is incorrect, because by dropping Delma, the company actually loses $1 per unit. 
D)  Christina is incorrect, because Delma is currently at break-even point.

Question 9

Pitfalls in using unit fixed costs
Fixed costs can be expressed as total fixed costs or can be divided by the expected level of activity to obtain fixed costs per unit. Which of these is likely to be more useful in decision making? Explain.

Accepted Answer

Total fixed costs will be more useful. U

Question 10

The joint cost allocation method that is not based on the economic characteristics of the joint products is the:

Accepted Answer

A)  joint cost allocation method. 
B)  relative sales value method. 
C)  physical units method. 
D)  net realisable value method. 
A)  joint cost allocation method. 
B)  relative sales value method. 
C)  physical units method. 
D)  net realisable value method.

Question 11

The most common trade-off in a decision situation is between information:

Accepted Answer

A)  accuracy and relevance. 
B)  relevance and timeliness. 
C)  accuracy and timeliness. 
D)  sensitivity and relevance. 
A)  accuracy and relevance. 
B)  relevance and timeliness. 
C)  accuracy and timeliness. 
D)  sensitivity and relevance.

Question 12

The split-off point is that stage in the manufacturing process where the products being manufactured can finally be identified as separate products.

Accepted Answer

A) True 
 B)False

Question 13

Zoota Ltd makes four products: Alta, Bepha, Delma and Gamta. The selling price and per unit costs are show below.  
*Alta and Delma share the same factory; therefore, monthly rent is allocated equally between the two products. Other allocated monthly fixed costs include administrative costs, which are allocated based on a $2/unit charge.
Zoota Ltd is planning to downsize by focusing on the two most profitable products, Bepha and Gamta, while discontinuing Alta and Delma. Which of the following are the correct assessments of the relevance of the items listed?

Accepted Answer

A)  Raw materials for both products (relevant), selling price of both products (relevant), allocated fixed cost for both products (relevant) 
B)  Raw materials for both products (relevant), selling price of both products (relevant), allocated rent for both products (relevant) 
C)  Raw materials for both products (relevant), selling price of both products (irrelevant), allocated rent for both products (irrelevant) 
D)  Raw materials for both products (relevant), allocated rent for both products (irrelevant), allocated fixed cost for both products (relevant) 
A)  Raw materials for both products (relevant), selling price of both products (relevant), allocated fixed cost for both products (relevant) 
B)  Raw materials for both products (relevant), selling price of both products (relevant), allocated rent for both products (relevant) 
C)  Raw materials for both products (relevant), selling price of both products (irrelevant), allocated rent for both products (irrelevant) 
D)  Raw materials for both products (relevant), allocated rent for both products (irrelevant), allocated fixed cost for both products (relevant)

Question 14

The primary advantage of differential analysis is that it:

Accepted Answer

A)  clearly shows the difference between the costs and benefits of the alternatives. 
B)  is much easier to formulate than total cost. 
C)  reduces the cost of one alternative by the cost of another. 
D)  only considers relevant costs. 
A)  clearly shows the difference between the costs and benefits of the alternatives. 
B)  is much easier to formulate than total cost. 
C)  reduces the cost of one alternative by the cost of another. 
D)  only considers relevant costs.

Question 15

Qualitative and quantitative characteristics
i. Distinguish between qualitative and quantitative characteristics.
ii. At what point in the six-step decision-making process do the qualitative characteristics have an impact?

Accepted Answer

i. Qualitative characteristics are facto

Question 16

Relevance of joint costs for decision
The managers of firm ST are facing a decision to further process product J2 before sale. J2 is one of three joint products provided by a manufacturing process. Product J2 presently is sold immediately after split-off. However, product J2 can be processed further and sold for a higher price. The overall volume of activity is not expected to change. Are the joint costs allocated to product J2 relevant for this decision? Explain your answer.

Accepted Answer

The joint production costs allocated to

Question 17

Criteria measured utilising quantitative terms include objectives such as:

Accepted Answer

A)  profit maximisation or cost minimisation. 
B)  cost minimisation and employee morale. 
C)  increased sales and improved quality. 
D)  cost minimisation and employee morale; increased sales and improved quality. 
A)  profit maximisation or cost minimisation. 
B)  cost minimisation and employee morale. 
C)  increased sales and improved quality. 
D)  cost minimisation and employee morale; increased sales and improved quality.

Question 18

Which of the following statements about relevant information is/are true?
i. For information to be relevant, it must relate to the future.
ii. For information to be relevant, it must differ between the alternatives.
iii. For information to be relevant, it must be completely accurate.

Accepted Answer

A)  i 
B)  i and ii 
C)  i and iii 
D)  All of the given answers 
A)  i 
B)  i and ii 
C)  i and iii 
D)  All of the given answers

Question 19

Sunk costs, unitising costs, how costs are allocated, and leaving out opportunity costs are all factors where errors are often made, and will ultimately affect the outcome of the decision.

Accepted Answer

A) True 
 B)False

Question 20

Mod Clothiers makes women's clothes. It costs $28 000 to produce 5000 pairs of polka-dot polyester pants. They have been unable to sell the pants at their usual price of $50.00. The company is evaluating two alternatives. They could sell the pants 'as is' for a total of $15 000 or they could modify the pants at a cost of $3000 and sell them for a total of $20 000.
What would be the effect on profit of modifying the pants and selling them as opposed to selling 'as is'?

Accepted Answer

A)  $8000 decrease 
B)  $11 000 decrease 
C)  $2000 increase 
D)  $3000 increase 
A)  $8000 decrease 
B)  $11 000 decrease 
C)  $2000 increase 
D)  $3000 increase

A joint cost is:

The term given to the practice of having a process undertaken by an external firm rather than a company doing it itself, is outsourcing.

Which of the following is a correct statement regarding the link between decision making and performance evaluation?

What term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?

The joint cost allocation method that ensures that the gross margin for each product is identical is the:

Pitfalls in using unit fixed costs Fixed costs can be expressed as total fixed costs or can be divided by the expected level of activity to obtain fixed costs per unit. Which of these is likely to be more useful in decision making? Explain.

The joint cost allocation method that is not based on the economic characteristics of the joint products is the:

The most common trade-off in a decision situation is between information:

The split-off point is that stage in the manufacturing process where the products being manufactured can finally be identified as separate products.

The primary advantage of differential analysis is that it:

Qualitative and quantitative characteristics i. Distinguish between qualitative and quantitative characteristics. ii. At what point in the six-step decision-making process do the qualitative characteristics have an impact?

Criteria measured utilising quantitative terms include objectives such as:

Which of the following statements about relevant information is/are true? i. For information to be relevant, it must relate to the future. ii. For information to be relevant, it must differ between the alternatives. iii. For information to be relevant, it must be completely accurate.

Sunk costs, unitising costs, how costs are allocated, and leaving out opportunity costs are all factors where errors are often made, and will ultimately affect the outcome of the decision.

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters

Exam 19: Information for Decisions: Relevant Costs and Benefits

A joint cost is:

The term given to the practice of having a process undertaken by an external firm rather than a company doing it itself, is outsourcing.

Which of the following is a correct statement regarding the link between decision making and performance evaluation?

What term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?

The joint cost allocation method that ensures that the gross margin for each product is identical is the:

Pitfalls in using unit fixed costs Fixed costs can be expressed as total fixed costs or can be divided by the expected level of activity to obtain fixed costs per unit. Which of these is likely to be more useful in decision making? Explain.

The joint cost allocation method that is not based on the economic characteristics of the joint products is the:

The most common trade-off in a decision situation is between information:

The split-off point is that stage in the manufacturing process where the products being manufactured can finally be identified as separate products.

The primary advantage of differential analysis is that it:

Qualitative and quantitative characteristics i. Distinguish between qualitative and quantitative characteristics. ii. At what point in the six-step decision-making process do the qualitative characteristics have an impact?

Criteria measured utilising quantitative terms include objectives such as:

Which of the following statements about relevant information is/are true? i. For information to be relevant, it must relate to the future. ii. For information to be relevant, it must differ between the alternatives. iii. For information to be relevant, it must be completely accurate.

Sunk costs, unitising costs, how costs are allocated, and leaving out opportunity costs are all factors where errors are often made, and will ultimately affect the outcome of the decision.

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters