FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 23: Relevant Costing for Managerial Decisions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

True/False

Review LaterAdd Note

Review Later

Additional power for operating machines,extra supplies,and added cleanup costs are examples of incremental overhead costs.

Correct Answer

verified

Show Answer

Question 72

Essay

Review LaterAdd Note

Review Later

Presented below are terms preceded by letters (a)through (g)and followed by a list of definitions 1 through 7.Match the letter of the term with the definition.Use the space provided preceding each definition. (a) Sales mix (b) Avoidable costs (c) Qualitative decision factors (d) Total cost method (e) Total cost per unit (f) Unavoidable expenses (g) Markup __________ (1) The production and nonproduction costs related to a given unit. __________ (2) Management sets sales price equal to the product's total costs plus a desired markup on the product. __________ (3) A desired profit amount. __________ (4) Amounts a company would continue to incur even if the segment in question is eliminated. __________ (5) Worker morale,company image,and reputation. __________ (6) Amounts a company would not incur if the segment in question is eliminated. __________ (7) The combination of products sold by a company.

Correct Answer

verified

(1)e (2) d...

View Answer

Show Answer

Question 73

Multiple Choice

Review LaterAdd Note

An opportunity cost:

A cost that requires a current and/or future outlay of cash,and is usually an incremental cost,is a(n) :

The decision to accept additional business should be based on a comparison of the incremental (differential)costs of the added production with the additional revenues to be received.

Identify the five steps involved in managerial decision making.

Romulus Company has 21,000 units of its sole product that it produced last year at a cost of $67 each.This year's model is superior to last year's and the 21,000 units cannot be sold for their regular selling price of $102 each.Romulus has two alternatives for these items: (1)they can be sold to a wholesaler for $38 each,or (2)they can be reworked at a total cost of $258,000 and then sold for $73 each.The company has enough idle capacity to rework these items without affecting any new production.Which choice would increase the company's profits the most?

A _______________________________ is the combination of products sold by a company.

A company expects its three departments to yield the following income for next year: $\begin{array}{lrrr} & \text { Dept. Q } & \text { Dept. R } & \text { Dept. S } \\\text { Sales } & \$ 6,000 & \$ 7,000 & \$ 8,000\\ \text { Expenses }\\\text { Avoidable } & 2,000 & 3,000 & 4,000 \\\text { Unavoidable } & 1,500 & 2,500 & 4,500 \\ \text { Total expenses } & 3,500 & 5,500 & 8,500 \\ \text { Net income(loss) } & \$ 2,500 & \$ 1,500 & \$(500) \end{array}$ Compute the change to the company's total net income if Dept.S is eliminated.

If a company has the capacity to produce either 10,000 units of Product X or 10,000 units of Product Y,and the markets for both products are unlimited,the company should commit 100% of its capacity to the product that has the higher contribution margin.

Reference: 23_01 Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively. -The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be:

Additional costs incurred if a company pursues a certain course of action are sunk costs.

An out-of-pocket cost benefits a business,but is paid by an outside party.

Paz Inc.manufactures a product that contains a small motor.The company has always purchased this motor from a supplier for $55 each.Paz recently upgraded its own manufacturing capabilities and now has enough excess capacity (including trained workers) to begin manufacturing the motor instead of buying it.The company prepared the following per unit cost projections of making the motor,assuming that overhead is allocated to the part at the normal predetermined overhead rate of 150% of direct labor cost. $\begin{array}{llr} \text { Direct materials} &\$16\\ \text { Direct labor} &20\\ \text { Overhead (fixed and } &30\\ \text {variable) } &\\ \text {Total } &\$66\\\end{array}$ The required volume of output to produce the motors will not require any incremental fixed overhead.Incremental variable overhead cost is $21 per motor.What is the effect on income if Paz decides to make the motors?

The potential benefit of one alternative that is lost by choosing another is known as a(n) :

Sales mix refers to the combination of products sold by a company.

What decision rule should be followed when deciding if a business segment should be eliminated?

A company manufactures two products.Each unit of product X requires 10 machine hours and each unit of product Y requires 4 machine hours.The company's productive capacity is limited to 180,000 machine hours.Each unit of product X sells for $15 and has variable costs of $7.Each unit of product Y sells for $8 and has variable costs of $3.If the company can sell all that it produces of both products,what should the sales mix be?

Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product units per year.A customer has offered to buy an additional 4,000 units at $25 each and sell them outside the country so as not to compete with Termus.The following data are available: $\begin{array} { l r r } \text { Costs at 85\%/ capacity: } &{ \text { Per } } & \\& \text { Unit } & \text { Total } \\\text { Direct materials } & \$ 10.00 & \$ 425,000 \\\text { Direct labor } & 8.00 & 340,000 \\\text { Overhead (fixed ard variable) } & 13.00 & 552,500 \\\text { Totals } & \$ 31.00 & \$ 1,317,500\end{array}$ In producing 4,000 additional units,fixed overhead costs would remain at their current level but incremental variable overhead costs of $4 per unit would be incurred.What is the effect on income if Termus accepts this order?

A company puts four products through a common production process.This process costs $100,000 each year.The four products can be sold when they emerge from this process at the "split-off point",or processed further and then sold.Data about the four products for the coming period are: $\begin{array}{lrrrr}&&\text { Unit Sales } & \text { Unit Sales } & \\&&\text { Price per } & \text { Price per } & \\&&\text { Pound } & \text { Pound } & \text { Additional } \\&&\text { at Split-Off } & \text { after Further } & \text { Processing }\\ \text { Product}&\text { Volume }&\text {Point}&\text { Processing }&\text {Costs }\\\text { Singer } & 20,000 \mathrm{lb} . & \$ 28.00 & \$ 42.00 & \$ 400,000 \\\text { Talker } & 10,000 \mathrm{lb} . & 7.00 & 28.00 & 144,000 \\\text { Walker } & 5,000 \mathrm{lb} . & 36.00 & 58.00 & 120,000 \\\text { Sayer } & 5,000 \mathrm{lb} . & 18.00 & 22.00 & 40,000\end{array}$ Determine which products should be sold at the split-off point and which should be processed further.