Question 1

When resources are constrained, managers should emphasise products and services that maximise the contribution margin per unit of constrained resource.

Accepted Answer

A) True 
 B)False

Question 2

The general rule is to discontinue a product line when its total profit margin is greater than its avoidable fixed cost.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a relevant qualitative factor in a special order decision?

Accepted Answer

A)   The cost of constrained resources
B)   The effect of production processes on the political environment
C)   The effect of production processes on the legal environment
D)   How easily customers might share price information

Question 4

In making a decision to drop a product line, variable costs are

Accepted Answer

A)   Always relevant
B)   Never relevant
C)   Usually relevant
D)   Usually sunk

Question 5

In making a special order decision, which of the following is a relevant fixed cost?

Accepted Answer

A)   Incremental fixed costs associated with current business
B)   Contribution margin of any current business replaced
C)   Depreciation on existing production equipment
D)   Incremental fixed costs associated with the order

Question 6

Growe Company manufactures sewing machines and requires 30,000 units of a component that is used in the manufacturing process. If Growe buys the part from Zigler Brothers, the plant will be idle. Of the fixed, 55% overhead will continue regardless of the decision. The cost to buy the part from Zigler is $46. The unit cost to make the part is: Which alternative is more profitable and by what amount?

Accepted Answer

A)   Buy, $150,000
B)   Make,$150,000
C)   Buy, $75,000
D)   Make, $75,000

Question 7

A company should always promote the product

Accepted Answer

A)   With the highest per unit contribution margin
B)   That results in the highest total contribution margin
C)   With the lowest variable cost per unit
D)   With the least waste

Question 8

Which of these is an opportunity cost associated with dropping a business segment?

Accepted Answer

A)   The revenue given up
B)   The avoidable fixed costs
C)   The benefits from using excess capacity for something else
D)   The increase in employee morale

Question 9

A cost that has been incurred in the past and cannot be changed is a (an)

Accepted Answer

A)   Short-term cost
B)   Opportunity cost
C)   Sunk cost
D)   Variable cost

Question 10

Non-routine operating decisions involve primarily decisions about long-term strategic plans.

Accepted Answer

A) True 
 B)False

Question 11

The process for addressing a non-routine operating decision begins with

Accepted Answer

A)   Applying relevant quantitative techniques
B)   Applying relevant qualitative techniques
C)   Questioning managers' judgment
D)   Identifying the type of decision involved

Question 12

Redmond Ltd is closing one of its divisions. Operating data on this division follows:  Overhead consists of $30,000 in salary and $10,000 for rent and insurance. The salary is for the chief engineer, who will continue to work for Redmond even if the division is closed.
Rent and insurance that will cease if the division is closed is an

Accepted Answer

A)   Unavoidable and irrelevant cost
B)   Unavoidable and relevant cost
C)   Avoidable and irrelevant cost
D)   Avoidable and relevant cost

Question 13

Special order decisions are long-term decisions that may need to include the time value of money.

Accepted Answer

A) True 
 B)False

Question 14

Tieton Ltd. has two departments, Fabrication and Assembly. They produce 2 products. Product T needs 6 hours in fabrication and 6 hours in assembly. Product S needs 2 hours in fabrication and 4 hours in assembly. Fabrication has 24 hours available and Assembly 18. Total variable costs are $ 20 and $15 for T and S respectively. T sells for $22 and S for $16. The objective function to maximise Tieton's profits is

Accepted Answer

A)   MAX$22T+ $16S
B)   MAX$20T+ $15S
C)   MAX$1T + $2S
D)   MAX$2T + $1S

Question 15

When resources are constrained, managers should emphasise the product with the

Accepted Answer

A)   Highest contribution margin per unit
B)   Highest contribution margin per unit of constrained resource
C)   Lowest average cost
D)   Largest market share

Question 16

The process for making a non-routine operating decision starts with identifying the decision type.

Accepted Answer

A) True 
 B)False

Question 17

The split-off point is

Accepted Answer

A)   the point at which the product is completed
B)   the first point at which joint products can be separately identified
C)   the point at which joint production commences
D)   none of the above

Question 18

Make or buy decisions are sometimes known as outsourcing decisions.

Accepted Answer

A) True 
 B)False

Question 19

Managers should accept a special order if its price is greater than the sum of

Accepted Answer

A)   all variable costs and all fixed costs
B)   all variable costs and all opportunity costs
C)   all fixed costs and all opportunity costs
D)   variable costs, relevant fixed costs and opportunity costs

Question 20

Qualitative factors can be difficult to identify because

Accepted Answer

A)   They are not usually relevant in non-routine operating decisions
B)   They are usually unimportant
C)   No set formula assures managers they have considered the important issues
D)   They are typically the same as sunk costs

Exam 9: Relevant Costs for Decision Making

Which of the following is a relevant qualitative factor in a special order decision?

Correct Answer
verified

Correct Answer
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Qualitative factors can be difficult to identify because

Correct Answer
verified

Non-routine operating decisions involve primarily decisions about long-term strategic plans.

Correct Answer
verified

A cost that has been incurred in the past and cannot be changed is a (an)

Correct Answer
verified

A company should always promote the product

Correct Answer
verified

Correct Answer
verified

Managers should accept a special order if its price is greater than the sum of

Correct Answer
verified

The split-off point is

Correct Answer
verified

Correct Answer
verified

In making a decision to drop a product line, variable costs are

Correct Answer
verified

Make or buy decisions are sometimes known as outsourcing decisions.

Correct Answer
verified

The process for making a non-routine operating decision starts with identifying the decision type.

Correct Answer
verified

Which of these is an opportunity cost associated with dropping a business segment?

Correct Answer
verified

In making a special order decision, which of the following is a relevant fixed cost?

Correct Answer
verified

The process for addressing a non-routine operating decision begins with

Correct Answer
verified

Special order decisions are long-term decisions that may need to include the time value of money.

Correct Answer
verified

The general rule is to discontinue a product line when its total profit margin is greater than its avoidable fixed cost.

Correct Answer
verified

When resources are constrained, managers should emphasise the product with the

Correct Answer
verified

When resources are constrained, managers should emphasise products and services that maximise the contribution margin per unit of constrained resource.

Correct Answer
verified

Exam 9: Relevant Costs for Decision Making

Which of the following is a relevant qualitative factor in a special order decision?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Qualitative factors can be difficult to identify because

Correct AnswerverifiedShow Answer

Non-routine operating decisions involve primarily decisions about long-term strategic plans.

Correct AnswerverifiedShow Answer

A cost that has been incurred in the past and cannot be changed is a (an)

Correct AnswerverifiedShow Answer

A company should always promote the product

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Managers should accept a special order if its price is greater than the sum of

Correct AnswerverifiedShow Answer

The split-off point is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In making a decision to drop a product line, variable costs are

Correct AnswerverifiedShow Answer

Make or buy decisions are sometimes known as outsourcing decisions.

Correct AnswerverifiedShow Answer

The process for making a non-routine operating decision starts with identifying the decision type.

Correct AnswerverifiedShow Answer

Which of these is an opportunity cost associated with dropping a business segment?

Correct AnswerverifiedShow Answer

In making a special order decision, which of the following is a relevant fixed cost?

Correct AnswerverifiedShow Answer

The process for addressing a non-routine operating decision begins with

Correct AnswerverifiedShow Answer

Special order decisions are long-term decisions that may need to include the time value of money.

Correct AnswerverifiedShow Answer

The general rule is to discontinue a product line when its total profit margin is greater than its avoidable fixed cost.

Correct AnswerverifiedShow Answer

When resources are constrained, managers should emphasise the product with the

Correct AnswerverifiedShow Answer

When resources are constrained, managers should emphasise products and services that maximise the contribution margin per unit of constrained resource.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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