Question 1

Sophisticates' Corner sells clothing,shoes,and accessories at a suburban location near Boston.Information for the just concluded calendar year follows.

Accepted Answer

Management is considering closing the ...

Question 2

Ortega Interiors provides design services to residential and commercial clients.The residential services produce a contribution margin of $450,000 and have traceable fixed operating costs of $480,000.Management is studying whether to drop the residential operation.If closed,the fixed operating costs will fall by $370,000 and Ortega's income will:

Accepted Answer

A)  increase by $30,000.
B)  increase by $80,000.
C)  increase by $340,000.
D)  decrease by $80,000.
E)  decrease by $340,000.

Question 3

Factors in a decision problem that cannot be expressed in numerical terms are:

Accepted Answer

A)  qualitative in nature.
B)  quantitative in nature.
C)  predictive in nature.
D)  sensitive in nature.
E)  uncertain in naturE.

Question 4

The cost of inventory currently owned by a company is an example of a(n) :

Accepted Answer

A)  opportunity cost.
B)  sunk cost.
C)  relevant cost.
D)  differential cost.
E)  future cost.

Question 5

A company that is operating at full capacity should emphasize those products and services that have the:

Accepted Answer

A)  lowest total per-unit costs.
B)  highest contribution margin per unit.
C)  highest contribution margin per unit of scarce resource.
D)  highest operating income.
E)  highest sales volumE.

Question 6

Lido manufactures A and B from a joint process (cost = $80,000) .Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16.If Lido decides to process B beyond the split-off point,operating income will:

Accepted Answer

A)  increase by $10,000.
B)  increase by $20,000.
C)  decrease by $10,000.
D)  decrease by $20,000.
E)  decrease by $58,000.

Question 7

A constraint function in a linear-programming problem might focus on:

Accepted Answer

A)  sales dollars.
B)  labor hours.
C)  variable costs.
D)  fixed costs.
E)  qualitative factors.

Question 8

A special order generally should be accepted if:

Accepted Answer

A)  its revenue exceeds allocated fixed costs,regardless of the variable costs associated with the order.
B)  excess capacity exists and the revenue exceeds all variable costs associated with the order.
C)  excess capacity exists and the revenue exceeds allocated fixed costs.
D)  the revenue exceeds total costs,regardless of available capacity.
E)  the revenue exceeds variable costs,regardless of available capacity.

Question 9

Fester Company is considering whether to sell Retox at the split-off point or subject it to further processing and produce a more refined product known as Retox-F.Consider the following items:
I.The selling price of Retox-F
II.The joint processing cost of Retox.
III.The separable cost of producing Retox-F.
Which of the above items is (are) relevant to Foster's decision to process Retox into Retox-F?

Accepted Answer

A)  I only.
B)  II only.
C)  III only.
D)  I and II.
E)  I and III.

Question 10

Mueller has been approached about providing a new service to its clients.The company will bill clients $140 per hour;the related hourly variable and fixed operating costs will be $75 and $18,respectively.If all employees are currently working at full capacity on other client matters,the per-hour opportunity cost of being unable to provide this new service is:

Accepted Answer

A)  $0.
B)  $47.
C)  $65.
D)  $93.
E)  $140.

Question 11

When deciding whether to sell a product at the split-off point or process it further,joint costs are not usually relevant because:

Accepted Answer

A)  such amounts do not help to increase sales revenue.
B)  such amounts only slightly increase a company's sales margin.
C)  such amounts are sunk and do not change with the decision.
D)  the sales revenue does not decrease to the extent that it should,if compared with separable processing.
E)  such amounts reflect opportunity costs.

Question 12

When using a graphical solution to a linear programming problem,the optimal solution will lie in an area commonly known as the:

Accepted Answer

A)  region of maximization.
B)  feasible region.
C)  objective region.
D)  constraint region.
E)  curvilinear region.

Question 13

If Smythe follows proper managerial accounting practices,how many units of Product X should it produce?

Accepted Answer

A)  5,000.
B)  1,500.
C)  8,000.
D)  4,500.
E)  6,000.

Question 14

HiTech wants to drop the Regular product line.If the line is dropped,company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities.What would be the impact on operating income if Regular is discontinued?

Accepted Answer

A)  $0.
B)  $10,400 increase.
C)  $20,000 increase.
D)  $39,600 decrease.
E)  None of thesE.

Question 15

An architecture firm currently offers services that appeal to both individuals and commercial clients.If the firm decides to discontinue services to individuals because of ongoing losses,which of the following costs could the company likely avoid?

Accepted Answer

A)  General corporate overhead that was allocated to individual clients.
B)  Building depreciation.
C)  Insurance.
D)  Variable operating costs.
E)  Monthly installment payments on general-purpose,computer drafting equipment.

Question 16

Which of the following statements regarding costs and decision making is correct?

Accepted Answer

A)  Fixed costs must be considered only on a per-unit basis.
B)  Per-unit fixed cost amounts are valid only for make-or-buy decisions.
C)  Per-unit fixed costs can be misleading because such amounts appear to behave as variable costs when,in actuality,the amounts are related to fixed expenditures.
D)  Sunk costs can be misleading in make-or-buy decisions because these amounts appear to be relevant differential costs.
E)  Opportunity costs should be ignored when evaluating decision alternatives.

Question 17

The term "opportunity cost" is best defined as the benefit associated with a rejected alternative when making a choice.

Accepted Answer

A) True 
 B)False

Question 18

Product costs incurred after the split-off point in a joint processing environment are termed:

Accepted Answer

A)  separable processing costs.
B)  joint product costs.
C)  non-relevant costs.
D)  scrap costs.
E)  spoilage costs.

Question 19

An accounting information system should be designed to provide information that is useful.To be useful the information must be:

Accepted Answer

A)  qualitative rather than quantitative.
B)  unique and unavailable through other sources.
C)  historical in nature and not purport to predict the future.
D)  marginal between two alternatives.
E)  relevant,accurate,and timely.

Question 20

Song,a division of Carolina Enterprises,currently makes 100,000 units of a product that has created a number of manufacturing problems.Song's costs follow. 
If Song were to discontinue production,fixed manufacturing costs would be reduced by 70%.The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

Accepted Answer

A)  $540,000.
B)  $594,000.
C)  $666,000.
D)  $720,000.
E)  $726,000.

Exam 14: Decision Making: Relevant Costs and Benefits

Factors in a decision problem that cannot be expressed in numerical terms are:

Correct Answer
verified

Correct Answer
verified

A company that is operating at full capacity should emphasize those products and services that have the:

Correct Answer
verified

When using a graphical solution to a linear programming problem,the optimal solution will lie in an area commonly known as the:

Correct Answer
verified

When deciding whether to sell a product at the split-off point or process it further,joint costs are not usually relevant because:

Correct Answer
verified

An architecture firm currently offers services that appeal to both individuals and commercial clients.If the firm decides to discontinue services to individuals because of ongoing losses,which of the following costs could the company likely avoid?

Correct Answer
verified

If Smythe follows proper managerial accounting practices,how many units of Product X should it produce?

Correct Answer
verified

HiTech wants to drop the Regular product line.If the line is dropped,company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities.What would be the impact on operating income if Regular is discontinued?

Correct Answer
verified

An accounting information system should be designed to provide information that is useful.To be useful the information must be:

Correct Answer
verified

The term "opportunity cost" is best defined as the benefit associated with a rejected alternative when making a choice.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements regarding costs and decision making is correct?

Correct Answer
verified

Sophisticates' Corner sells clothing,shoes,and accessories at a suburban location near Boston.Information for the just concluded calendar year follows.

Correct Answer
verified

Management is considering closing the ...
View Answer

A constraint function in a linear-programming problem might focus on:

Correct Answer
verified

The cost of inventory currently owned by a company is an example of a(n) :

Correct Answer
verified

Lido manufactures A and B from a joint process (cost = $80,000) .Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16.If Lido decides to process B beyond the split-off point,operating income will:

Correct Answer
verified

A special order generally should be accepted if:

Correct Answer
verified

Product costs incurred after the split-off point in a joint processing environment are termed:

Correct Answer
verified

Exam 14: Decision Making: Relevant Costs and Benefits

Factors in a decision problem that cannot be expressed in numerical terms are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company that is operating at full capacity should emphasize those products and services that have the:

Correct AnswerverifiedShow Answer

When using a graphical solution to a linear programming problem,the optimal solution will lie in an area commonly known as the:

Correct AnswerverifiedShow Answer

When deciding whether to sell a product at the split-off point or process it further,joint costs are not usually relevant because:

Correct AnswerverifiedShow Answer

An architecture firm currently offers services that appeal to both individuals and commercial clients.If the firm decides to discontinue services to individuals because of ongoing losses,which of the following costs could the company likely avoid?

Correct AnswerverifiedShow Answer

If Smythe follows proper managerial accounting practices,how many units of Product X should it produce?

Correct AnswerverifiedShow Answer

HiTech wants to drop the Regular product line.If the line is dropped,company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities.What would be the impact on operating income if Regular is discontinued?

Correct AnswerverifiedShow Answer

An accounting information system should be designed to provide information that is useful.To be useful the information must be:

Correct AnswerverifiedShow Answer

The term "opportunity cost" is best defined as the benefit associated with a rejected alternative when making a choice.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding costs and decision making is correct?

Correct AnswerverifiedShow Answer

Sophisticates' Corner sells clothing,shoes,and accessories at a suburban location near Boston.Information for the just concluded calendar year follows.

Correct Answerverified Management is considering closing the ...View AnswerShow Answer

A constraint function in a linear-programming problem might focus on:

Correct AnswerverifiedShow Answer

The cost of inventory currently owned by a company is an example of a(n) :

Correct AnswerverifiedShow Answer

Lido manufactures A and B from a joint process (cost = $80,000) .Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16.If Lido decides to process B beyond the split-off point,operating income will:

Correct AnswerverifiedShow Answer

A special order generally should be accepted if:

Correct AnswerverifiedShow Answer

Product costs incurred after the split-off point in a joint processing environment are termed:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Management is considering closing the ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified