Question 1

Moyer Corporation is a specialty component manufacturer with idle capacity.Management would like to use its extra capacity to generate additional profits.A potential customer has offered to buy 2,300 units of component TIB.Each unit of TIB requires 9 units of material F58 and 7 units of material D66.Data concerning these two materials follow:
Material F58 is in use in many of the company's products and is routinely replenished.Material D66 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up.
What would be the relevant cost of the materials,in total,for purposes of determining a minimum acceptable price for the order for product TIB?
A)$189,290
B)$174,215
C)$168,533
D)$200,905

Accepted Answer

Materials requirements for F58: 2,300 units of TIB × 9 units of F58 per unit of TIB = 20,700 units of F58
Materials requirements for D66: 2,300 units of TIB × 7 units of D66 per unit of TIB = 16,100 units of D66
 11eaa3fe_342f_57e6_908b_d3efa7f51186_TB2461_00 * 16,100 units - 15,700 units = 400 units

Question 2

In a make-or-buy decision,relevant costs include:
A)unavoidable fixed costs
B)avoidable fixed costs
C)fixed factory overhead costs applied to products
D)fixed selling and administrative expenses

Accepted Answer

The answer of In a make-or-buy decision,relevant costs include:
A)unavoidable fixed...

Question 3

Opportunity costs are:
A)not used for decision making.
B)the same as variable costs.
C)the same as historical costs.
D)relevant in decision making.

Accepted Answer

The answer of Opportunity costs are:
A)not used for decision making.
B)the...

Question 4

Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.

Accepted Answer

The answer of Joint costs are relevant in the decision...

Question 5

In a sell or process further decision,which of the following costs is relevant? I.A variable production cost incurred after split-off.
II)A fixed production cost incurred prior to split-off.
A)Only I
B)Only II
C)Both I and II
D)Neither I nor II

Accepted Answer

The answer of In a sell or process further decision,which...

Question 6

Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks.

Accepted Answer

The answer of Eliminating nonproductive processing time is particularly important...

Question 7

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester.Which of the following would be considered an opportunity cost of attending college?
A)the cost of the textbooks
B)the cost of the cola that Hal will consume during class
C)Hal's lost wages at Burger Haven
D)the cost of commuting to the Burger Haven job

Accepted Answer

The answer of Hal currently works as the fry guy...

Question 8

When a company has a production constraint,total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.

Accepted Answer

The answer of When a company has a production constraint,total...

Question 9

Bosques Corporation has in stock 35,800 kilograms of material L that it bought five years ago for $5.55 per kilogram.This raw material was purchased to use in a product line that has been discontinued.Material L can be sold as is for scrap for $1.67 per kilogram.An alternative would be to use material L in one of the company's current products,Q08C,which currently requires 2 kilograms of a raw material that is available for $9.15 per kilogram.Material L can be modified at a cost of $0.78 per kilogram so that it can be used as a substitute for this material in the production of product Q08C.However,after modification,4 kilograms of material L is required for every unit of product Q08C that is produced.Bosques Corporation has now received a request from a company that could use material L in its production process.Assuming that Bosques Corporation could use all of its stock of material L to make product Q08C or the company could sell all of its stock of the material at the current scrap price of $1.67 per kilogram,what is the minimum acceptable selling price of material L to the company that could use material L in its own production process?
A)$5.365 per kg
B)$3.795 per kg
C)$2.133 per kg
D)$1.675 per kg

Accepted Answer

11eaa3fe_342f_cd17_908b_e92426b17784_TB2461_00 The value of using material L to produce Q08C is greater than its scrap value,so the company would be giving up benefits of $3.795 per kilogram if it were to sell material L.Therefore,the minimum acceptable price is $3.795 per kilogram.

Question 10

When a multi-product factory operates at full capacity,decisions must be made about which products to emphasize.In making such decisions,products should be ranked based on:
A)selling price per unit
B)contribution margin per unit
C)contribution margin per unit of the constraining resource
D)unit sales volume

Accepted Answer

The answer of When a multi-product factory operates at full...

Question 11

Management is considering a one-time-only special order.There is sufficient idle capacity to fill the order without affecting any normal sales.Which one of the following is NOT relevant in making the decision?
A)absorption costing unit product costs
B)variable costs
C)incremental costs
D)differential costs

Accepted Answer

The answer of Management is considering a one-time-only special order.There...

Question 12

The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers.

Accepted Answer

The answer of The split-off point in a process that...

Question 13

Consider the following statements: I.A division's net operating income,after deducting both traceable and allocated common fixed costs,is negative.
II)The division's avoidable fixed costs exceed its contribution margin.
III)The division's traceable fixed costs plus its allocated common corporate costs exceed its contribution margin.
Which of the above statements is a valid reason for eliminating the division?
A)Only I
B)Only II
C)Only III
D)Only I and II

Accepted Answer

The answer of Consider the following statements: I.A division's net...

Question 14

Which of the following is not an effective way of dealing with a production constraint (i.e. ,bottleneck)?
A)Reduce the number of defective units produced at the bottleneck.
B)Pay overtime to workers assigned to the bottleneck.
C)Pay overtime to workers assigned to work stations located after the bottleneck in the production process.
D)Subcontract work that would otherwise require use of the bottleneck.

Accepted Answer

The answer of Which of the following is not an...

Question 15

Joint products are products that are sold to customers as a set or as part of a group of products.

Accepted Answer

Multiple Choice

Question 16

Two or more products produced from a common input are called:
A)common costs.
B)joint products.
C)joint costs.
D)sunk costs.

Accepted Answer

The answer of Two or more products produced from a...

Question 17

In a factory operating at capacity,not every machine and person should be working at the maximum possible rate.

Accepted Answer

The answer of In a factory operating at capacity,not every...

Question 18

Defective units should be detected and scrapped or reworked before the bottleneck operation rather than after it.

Accepted Answer

The answer of Defective units should be detected and scrapped...

Question 19

One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers.

Accepted Answer

The answer of One way to increase the effective utilization...

Question 20

The term joint cost is used to describe the costs incurred after the split-off point in a process involving joint products.

Accepted Answer

The answer of The term joint cost is used to...

Quiz 11: Differential Analysis: The Key to Decision Making

In a make-or-buy decision,relevant costs include:

Opportunity costs are:

Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.

In a sell or process further decision,which of the following costs is relevant? I.A variable production cost incurred after split-off. II) A fixed production cost incurred prior to split-off.

Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks.

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester.Which of the following would be considered an opportunity cost of attending college?

When a company has a production constraint,total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.

When a multi-product factory operates at full capacity,decisions must be made about which products to emphasize.In making such decisions,products should be ranked based on:

Management is considering a one-time-only special order.There is sufficient idle capacity to fill the order without affecting any normal sales.Which one of the following is NOT relevant in making the decision?