Question 1

Decision problems involving accounting data are specified in:

Accepted Answer

A)  qualitative terms. 
B)  quantitative terms. 
C)  financial aspects. 
D)  accounting aspects. 
A)  qualitative terms. 
B)  quantitative terms. 
C)  financial aspects. 
D)  accounting aspects.

Question 2

An opportunity cost is defined as:

Accepted Answer

A)  the profit of the next best alternative foregone. 
B)  the additional revenue if we do not drop the product. 
C)  the additional (incremental) cost of accepting the order. 
D)  not being relevant if there is excess capacity. 
A)  the profit of the next best alternative foregone. 
B)  the additional revenue if we do not drop the product. 
C)  the additional (incremental) cost of accepting the order. 
D)  not being relevant if there is excess capacity.

Question 3

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.
What will be the company's total fixed cost (excluding rent) after Delma is dropped (assuming that sales volume = production volume)?

Accepted Answer

A)  $30 000 
B)  $40 000 
C)  $50 000 
D)  $60 000 
A)  $30 000 
B)  $40 000 
C)  $50 000 
D)  $60 000

Question 4

Consider the situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

Accepted Answer

A)  The relevant cost decision model would be inappropriate if activity-based costing is used. 
B)  The relevant cost decision model is still appropriate, but a different decision criterion must be used. 
C)  The data collection and analysis step is going to be affected by the use of non-volume-related cost drivers. 
D)  The relevant cost decision model would be inappropriate if activity-based costing is used AND the data collection and analysis step is going to be affected by the use of non-volume-related cost drivers. 
A)  The relevant cost decision model would be inappropriate if activity-based costing is used. 
B)  The relevant cost decision model is still appropriate, but a different decision criterion must be used. 
C)  The data collection and analysis step is going to be affected by the use of non-volume-related cost drivers. 
D)  The relevant cost decision model would be inappropriate if activity-based costing is used AND the data collection and analysis step is going to be affected by the use of non-volume-related cost drivers.

Question 5

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 relative sales value method had been used?

Accepted Answer

A)  $120 000 
B)  $80 000 
C)  $84 000 
D)  Insufficient information to determine 
A)  $120 000 
B)  $80 000 
C)  $84 000 
D)  Insufficient information to determine

Question 6

Xebex Pty Ltd is considering whether to make or buy a component used in the production of Faz Machines. The annual cost of producing the 100 000 components used by the company is as follows.  
If Xebex were to discontinue production of the component, direct fixed manufacturing costs would be reduced by 80 per cent.
Xebex should buy the 100 000 components if the cost of purchasing per unit is less than what amount?

Accepted Answer

A)  $4.50 
B)  $4.00 
C)  $3.80 
D)  $3.00 
A)  $4.50 
B)  $4.00 
C)  $3.80 
D)  $3.00

Question 7

In order for information to be relevant, the decision to be made must have an effect on:
i. future cost or revenues.
ii. past cost or revenues.
iii. the timeliness of information.

Accepted Answer

A)  i 
B)  ii 
C)  iii 
D)  i and ii 
A)  i 
B)  ii 
C)  iii 
D)  i and ii

Question 8

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 with an additional cost of $0.66667 litre, then sold for $1.50 litre.
Apple pulp: processed further in Process 3 with 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 physical measures method had been used?

Accepted Answer

A)  $120 000 
B)  $80 000 
C)  $84 000 
D)  $130 000 
A)  $120 000 
B)  $80 000 
C)  $84 000 
D)  $130 000

Question 9

Which of the following statements about relevant information is/are true?
i. An accountant can use past prices, previous market demand and previous cost data to predict future costs when repetitive decisions are made.
ii. No relevant information is available within an organisation's information system for unique decisions.
iii. It is important to segregate relevant data from irrelevant data because it is possible to overload management with information.

Accepted Answer

A)  i 
B)  ii 
C)  ii and iii 
D)  i and iii 
A)  i 
B)  ii 
C)  ii and iii 
D)  i and iii

Question 10

Contribution margin per machine hour can be calculated by dividing:

Accepted Answer

A)  machine hours required per unit by sales margin per unit. 
B)  contribution margin per unit by machine hours required per unit. 
C)  machine hours required per unit by contribution margin per unit. 
D)  total machine hours required by total contribution margin. 
A)  machine hours required per unit by sales margin per unit. 
B)  contribution margin per unit by machine hours required per unit. 
C)  machine hours required per unit by contribution margin per unit. 
D)  total machine hours required by total contribution margin.

Question 11

Consider a situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

Accepted Answer

A)  The use of activity-based costing eliminates the need to consider qualitative factors. 
B)  When an activity-based costing system is used, facility level costs will have to be analysed differently than under a traditional volume-based costing system. 
C)  When an activity-based costing system is used, unit level costs will have to be analysed differently than when a traditional volume-based costing system is used. 
D)  None of the given answers 
A)  The use of activity-based costing eliminates the need to consider qualitative factors. 
B)  When an activity-based costing system is used, facility level costs will have to be analysed differently than under a traditional volume-based costing system. 
C)  When an activity-based costing system is used, unit level costs will have to be analysed differently than when a traditional volume-based costing system is used. 
D)  None of the given answers

Question 12

Manufacturers sometimes sell products at less than full price for a special order. The analysis of such decisions focuses on:

Accepted Answer

A)  fixed cost. 
B)  relevant benefits. 
C)  relevant costs. 
D)  both relevant benefits and relevant costs. 
A)  fixed cost. 
B)  relevant benefits. 
C)  relevant costs. 
D)  both relevant benefits and relevant costs.

Question 13

When a department or a product is showing a loss after all costs have been traced and allocated, a company has no option but to make the decision to either close the department or drop the product.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements in relation to making tactical decisions is incorrect?

Accepted Answer

A)  Future costs are always relevant. 
B)  Sunk costs are always irrelevant. 
C)  Allocated and unitised fixed costs are generally irrelevant. 
D)  Opportunity cost is relevant when there is no excess capacity. 
A)  Future costs are always relevant. 
B)  Sunk costs are always irrelevant. 
C)  Allocated and unitised fixed costs are generally irrelevant. 
D)  Opportunity cost is relevant when there is no excess capacity.

Question 15

Characteristics for information for decision making
i. One characteristic of information that is essential in order for the information to be useful for decision making is relevance. What are the other two characteristics?
ii. Frequently there is a conflict between the two characteristics requested in question (i), describe why this conflict exists.
iii. What distinguishes relevant information from irrelevant information?

Accepted Answer

i. The three characteristics are relevan

Question 16

Which of the following costs would not be recorded in the cost accounting system?

Accepted Answer

A)  Sunk costs 
B)  Unitised costs 
C)  Opportunity costs 
D)  Allocated costs 
A)  Sunk costs 
B)  Unitised costs 
C)  Opportunity costs 
D)  Allocated costs

Question 17

When cost allocations are used to encourage the sales managers to push the higher margin products this action will link:

Accepted Answer

A)  decision making and budgeting. 
B)  decision making and management performance evaluation. 
C)  budgeting and management performance. 
D)  budgeting and targets. 
A)  decision making and budgeting. 
B)  decision making and management performance evaluation. 
C)  budgeting and management performance. 
D)  budgeting and targets.

Question 18

If a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:

Accepted Answer

A)  it is a historical cost precise in nature. 
B)  it is a historical cost that is the same among all alternatives. 
C)  it is an expected future cost that is the same for each alternative. 
D)  it is an expected future cost that is different for each alternative. 
A)  it is a historical cost precise in nature. 
B)  it is a historical cost that is the same among all alternatives. 
C)  it is an expected future cost that is the same for each alternative. 
D)  it is an expected future cost that is different for each alternative.

Question 19

Relevance of joint costs for decision
The managers of firm LT are facing a decision to discontinue the production process. This process begins with a joint process that yields three products. Each of the three products is further processed after the split-off point. The costs of the entire production process are broken down into two major categories: costs of the joint process before split-off and after split-off. Discuss the relevance of each of these categories of costs to the decision to discontinue the entire production process.

Accepted Answer

The incremental costs in both categories

Question 20

Generally, joint costs are not relevant in decision making after split-off because:

Accepted Answer

A)  they do not help increase the sales. 
B)  they increase the sales margin only marginally. 
C)  they do not change regardless of any decision. 
D)  joint costs reflect opportunity costs. 
A)  they do not help increase the sales. 
B)  they increase the sales margin only marginally. 
C)  they do not change regardless of any decision. 
D)  joint costs reflect opportunity costs.

Decision problems involving accounting data are specified in:

An opportunity cost is defined as:

Consider the situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

In order for information to be relevant, the decision to be made must have an effect on: i. future cost or revenues. ii. past cost or revenues. iii. the timeliness of information.

Contribution margin per machine hour can be calculated by dividing:

Consider a situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

Manufacturers sometimes sell products at less than full price for a special order. The analysis of such decisions focuses on:

When a department or a product is showing a loss after all costs have been traced and allocated, a company has no option but to make the decision to either close the department or drop the product.

Which of the following statements in relation to making tactical decisions is incorrect?

Which of the following costs would not be recorded in the cost accounting system?

When cost allocations are used to encourage the sales managers to push the higher margin products this action will link:

If a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:

Generally, joint costs are not relevant in decision making after split-off because:

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

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Exam 19: Information for Decisions: Relevant Costs and Benefits

Decision problems involving accounting data are specified in:

An opportunity cost is defined as:

Consider the situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

In order for information to be relevant, the decision to be made must have an effect on: i. future cost or revenues. ii. past cost or revenues. iii. the timeliness of information.

Contribution margin per machine hour can be calculated by dividing:

Consider a situation where an activity-based costing system is in use rather than a traditional volume-based costing system. Which of the following statements is/are true?

Manufacturers sometimes sell products at less than full price for a special order. The analysis of such decisions focuses on:

When a department or a product is showing a loss after all costs have been traced and allocated, a company has no option but to make the decision to either close the department or drop the product.

Which of the following statements in relation to making tactical decisions is incorrect?

Which of the following costs would not be recorded in the cost accounting system?

When cost allocations are used to encourage the sales managers to push the higher margin products this action will link:

If a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:

Generally, joint costs are not relevant in decision making after split-off because:

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