1. The amount of increase or decrease in revenue that is expected from a particu
ID: 2348149 • Letter: 1
Question
1. The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is termed:a. manufacturing margin
b. contribution margin
c. differential cost
d. differential revenue
2. A cost that will not be affected by later decisions is termed a(n):
a. historical cost
b. differential cost
c. sunk cost
d. replacement cost
3. The condensed income statement for a business for the past year is presented as follows:
Product
F G H Total
Sales $300,000 $210,000 $340,000 $850,000
Less variable costs 180,000 190,000 220,000 590,000
Contribution margin $120,000 $ 20,000 $120,000 $260,000
Less fixed costs 50,000 50,000 40,000 140,000
Income (loss) from oper. $ 70,000 $ (30,000) $ 80,000 $120,000
Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. What is the amount of change in net income for the current year that will result from the discontinuance of Product G?
a. $20,000 increase
b. $30,000 increase
c. $20,000 decrease
d. $30,000 decrease
4. A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit. The unit cost for the business to make the part is $20, including fixed costs, and $12, not including fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
a. $150,000 cost increase
b. $ 90,000 cost decrease
c. $150,000 cost increase
d. $ 90,000 cost increase
5. The amount of income that would result from an alternative use of cash is called:
a. differential income
b. sunk cost
c. differential revenue
d. opportunity cost
6. Pheasant Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $60 per pound and would require an additional cost of $24 per pound to produce. What is the differential cost of producing Product C?
a. $30 per pound
b. $24 per pound
c. $28 per pound
d. $60 per pound
7. Raven Company is considering replacing equipment which originally cost $500,000 and which has $460,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in this situation?
a. $330,000
b. $500,000
c. $40,000
d. $290,000
8. A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
Domestic unit sales price $21
Unit manufacturing costs:
Variable 12
Fixed 5
What is the differential revenue from the acceptance of the offer?
a. $300,000
b. $420,000
c. $120,000
d. $240,000
9. Relevant revenues and costs focus on:
a. activities that occurred in the past
b. monies already earned and/or spent
c. last year's net income
d. differences between the alternatives being considered
Falcon Co. produces a single product. Its normal selling price is $30.00 per unit. The variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of $20.00 per unit. Falcon Co. has the capacity to handle the special order and, for this order, a variable selling cost of $1.00 per unit would be eliminated.
10. If the order is accepted, what would be the impact on net income?
a. decrease of $750
b. decrease of $4,500
c. increase of $3,000
d. increase of $1,500
11. Should the special order be accepted?
a. Cannot determine from the data given
b. Yes
c. No
d. There would be no difference in accepting or rejecting the special order
12. Mighty Safe Fire Alarm is currently buying 50,000 motherboard from MotherBoard, Inc. at a price of $65 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: Direct Materials $32 per unit, Direct labor $10 per unit, Variable Factory Overhead $16.00, Fixed Costs for the plant would increase by $75,000. Which option should be selected and why?
a. Buy - $75,000 more in profits
b. Make - $275,000 increase in profits
c. Buy - $275,000 more in profits
d. Make - $350,000 increase in profits
13. All of the following should be considered in a make or buy decision except
a. cost savings
b. quality issues with the supplier
c. future growth in the plant and other production opportunities
d. the supplier will make a profit that would no longer belong to the business
14. Which of the following is NOT a cost concept commonly used in applying the cost-plus approach to product pricing?
a. Total cost concept
b. Product cost concept
c. Variable cost concept
d. Fixed cost concept
Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000.
Fixed factory overhead cost $38,700
Fixed selling and administrative costs 7,500
Variable direct materials cost per unit 4.60
Variable direct labor cost per unit 1.88
Variable factory overhead cost per unit 1.13
Variable selling and administrative cost per unit 4.50
15. The dollar amount of desired profit from the production and sale of the company's product is:
a. $175,000
b. $67,200
c. $73,500
d. $96,000
16. The cost per unit for the production and sale of the company's product is:
a. $12.11
b. $12.88
c. $15
d. $13.50
17. The markup percentage on total cost for the company's product is:
a. 21.0%
b. 22.7%
c. 15.8%
d. 24.0%
18. The unit selling price for the company's product is:
a. $15.00
b. $13.82
c. $15.80
d. $14.76
19. Which of the following is important when evaluating long-term investments?
a. Investments must earn a reasonable rate of return
b. Employees are able to determine and propose capital equipment for their divisions or departments
c. Proposals should match long term goals.
d. All of the above.
20. Which of the following is a present value method of analyzing capital investment proposals?
a. Average rate of return
b. Cash payback method
c. Accounting rate of return
d. Net present value
21. The primary advantages of the average rate of return method are its ease of computation and the fact that:
a. it is especially useful to managers whose primary concern is liquidity
b. there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term
c. it emphasizes the amount of income earned over the life of the proposal
d. rankings of proposals are necessary
22.The expected average rate of return for a proposed investment of $800,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is:
a. 30%
b. 15%
c. 60%
d. 7.5%
23. An anticipated purchase of equipment for $580,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows:
Year Net Income Net Cash Flow
1 $60,000 $110,000
2 50,000 100,000
3 50,000 100,000
4 40,000 90,000
5 40,000 90,000
6 40,000 90,000
7 40,000 90,000
8 40,000 90,000
What is the cash payback period?
a. 5 years
b. 4 years
c. 6 years
d. 3 years
24. The rate of earnings is 10% and the cash to be received in three years is $10,000. Determine the present value amount, using the following partial table of present value of $1 at compound interest:
Year 6% 10% 12%
1 .943 .909 .893
2 .890 .826 .797
3 .840 .751 .712
4 .792 .683 .636
a. $13,316
b $6,830
c. $7,510
d. $ 8,260
25 Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $104,904. Estimated cash flows are expected to be $36,000 annually for four years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is:
a 2%
b 2.4%
c 14%
d 3%
26. Which of the following methods of evaluating investments in fixed assets does not consider cash flows?
a. average rate of return
b. net present value
c. internal rate of return
d. cash payback
27. Which of the following is not true about the Internal Rate of Return (IRR) method of evaluating investments?
a. It takes into consideration the time value of money concept.
b. One of its advantages is that it shows the percent return that is expected.
c. If the answer is above zero, the investment proposal should be accepted.
d. All of the above are true about IRR
28 . Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $150,000. The present value of the future cash flows is $145,000. Should they invest in this project?
a yes, because net present value is +$5,000
b yes, because net present value is -$5,000
c no, because net present value is +$5,000
d no, because net present value is -$5,000
29. By converting dollars to be received in the future into current dollars, the present value methods take into consideration that money:
a has an international rate of exchange
b is the language of business
c is the measure of assets, liabilities, and stockholders' equity on financial statements
d has a time value
30. Which of the following are two methods of analyzing capital investment proposals that both ignore present value?
a Internal rate of return and average rate of return
b Net present value and average rate of return
c Internal rate of return and net present value
d Average rate of return and cash payback method
31.Which of the following is not a factory overhead allocation method?
a. single plantwide rate
b. multiple departmental rates
c. traditional costing
d. activity-based costing
32. Which of the following is a disadvantage of the single overhead rate approach to product costing?
a. difficult to implement
b. expensive to implement
c. not practical if multiple products consume overhead in different amounts
d. all of the above
33. The _________ approach to cost allocation uses multiple activity cost pools and cost drivers to apply overhead to a product cost.
a. single overhead rate
b. activity-based costing
c. multiple department rates
d. total quality management
34. Which approach to cost allocation is considered the most accurate?
a. single overhead rate
b. activity-based costing
c. multiple department rates
d. total quality management
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.
Activity
Cost
Activity Base
Procurement $ 370,000 Number of purchase orders
Scheduling 250,000 Number of production orders
Materials handling 500,000 Number of moves
Product development 730,000 Number of engineering changes
Production 1,500,000 Machine hours
Number of
Purchase
Orders Number
of
Production
Orders
Number
of
Moves
Number of Engineering
Changes
Machine
Hours
Number
of
Units
Disk drives 4,000 300 1,400 10 2,000 2,000
Tape drives 4,000 150 800 10 8,000 4,000
Wire drives 12,000 800 4,000 25 10,000 2,500
35. 35 Determine the activity rate for procurement per purchase order.
a $43.53
b $18.50
c $15.42
d $37.00
36.. Determine the activity rate per production order for scheduling.
a $200.00
b $20.00
c $29.41
d $10.42
37. Determine the activity rate for materials handling per move.
a $58.82
b $50.00
c $20.83
d $80.65
38. Determine the activity rate for product development per change.
a $73,000
b $8,588
c $30,417
d $16,222
39. Determine the activity rate for production per machine hour.
a $62.50
b $150.00
c $75.00
d $176.47
40. Determine the activity-based cost for each disk drive unit.
a $92.25
b $130.69
c $394.12
d $279.57
41. Determine the activity-based cost for each wire drive unit.
a $204.13
b $173.51
c $744.06
d $394.12
42. Determine the activity-based cost for each tape drive unit.
a $97.73
b $232.69
c $394.12
d $103.84
43. The just-in-time (JIT) philosophy attempts to reduce setup times, which will:
a. increase batch sizes
b. not affect batch sizes
c. increase within-batch wait time
d decrease within-batch wait time
44. How are the objectives of just-in-time (JIT) manufacturing achieved?
a. Product-oriented production layout
b. Employee involvement
c. Supplier partnering
d. All of the above
45 Traditional manufacturing emphasizes all of the following except
a. team oriented employee involvement
b. process-oriented layout
c. push manufacturing
d. cost accumulation by department
46. Which of the following is characteristic of a just-in-time (JIT) production layout?
a. Decentralized maintenance
b. Small production batches
c. Organization around processes
d. Both A and B
47. Which of the following is characteristic of a just-in-time system?
a. Fewer work in process account transactions.
b. Work in process and raw materials accounts combined.
c. Elimination of the direct labor account.
d. All of the above.
48. Which of the following is characteristic of a traditional cost system?
a. Many work in process account transactions.
b. Reliance on financial performance measures.
c. Many process control points.
d. All of the above.
49. Which of the following is an example of a non-financial measure?
a. lead time
b. setup time
c. units scrapped
d. all of the above
50. Which of the following is best suited to providing timely and focused performance information?
a. non-financial information
b. financial accounting information
c. cost accounting information
d. variance analysis
Explanation / Answer
2. A cost that will not be affected by later decisions is termed a(n): sunk cost 5. The amount of income that would result from an alternative use of cash is called: d. opportunity cost
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.