21. The relevance of a particular cost to a decision is determined by the: (CMA adapted) A. riskiness of the decision. . number of decision variables. C. amount of the cost. !. potential e"ect on the decision. #. accuracy of the cost. !. potential e"ect on the decision.
22. $n a decision analysis situation% situation% &hich one of the follo&in' costs is not likely to contain a variable cost component (CMA adapted) A. abor . *verhead C. +trai'ht,line !epreciation !. +ellin' #. Material C. +trai'ht,line !epreciation
2-. hich of the follo&in' statements re'ardin' di"erential costs is (are) false (A) The full cost fallacy occurs &hen a decision,maker fails to include /0ed manufacturin' overhead in the products cost. () hen decidin' &hether or not to accept a special order% a decision,maker should focus on di"erential costs instead of full costs. A. *nly A. . *nly . C. either A nor is false. !. oth A and are true. A. *nly A.
23. hich of the follo&in' costs are irrelevant for a special order that &ill allo& an or'ani4ation to utili4e some of its present idle capacity A. !irect materials . $ndirect materials C. 5ariable overhead !. 6navoidable /0ed overhead #. !i"erential sales commission !. 6navoidable /0ed overhead
27. hich of the follo&in' statements re'ardin' special orders is (are) true (A) The primary decision for special orders is determinin' &hether the di"erential revenue is 'reater than the di"erential costs associated &ith the
order. () The di"erential analysis approach to pricin' for special orders could lead to underpricin' in the lon',run because /0ed costs are not included in the analysis. A. *nly A. . *nly . C. either A nor is false. !. oth A and are true. !. oth A and are true.
28. hich of the follo&in' costs are not considered in a di"erential analysis for a make,or,buy decision A. $ndirect materials and indirect labor if the item is manufactured internally . !irect materials and direct labor if the item is purchased C. 5ariable overhead if the item is manufactured internally !. 9i0ed overhead that can be avoided if the item is purchased #. 9i0ed overhead that &ill continue if the item is purchased #. 9i0ed overhead that &ill continue if the item is purchased
2. 9or the past /ve years% the ;+ Company has produced and sold electronic ma'nets to chemistry labs throu'hout the 6nited +tates. ;ecently% a stron' competitor has entered the market and ;+ is considerin' &hether it should continue to produce and sell the electronic ma'nets. The follo&in' information has been 'athered to assist mana'ement in their decision: A) The machinery used to produce the ma'net &as purchased /ve,years a'o for <7==%===. ) 9our of the employees &ho produce ma'nets &ould be reassi'ned to the ma'nifyin' 'lass division. C) The space no& used to produce the ma'nets &ould be used to eliminate the need to rent &arehouse space. !) +ales volume (units) is estimated to drop by 7=> once the competitor becomes fully operational. operational. hich of the items listed above is (are) relevant to the decision to continue the production and sale of the electronic ma'nets A. A and C. . and C. C. C and !. !. A% % and !. #. % C% and !. C. C and !.
2?. hich of the follo&in' statements about the theory of constraints is (are) true
(A) The theory of constraints focuses on determinin' the optimal product mi0 &hen one or more resources restrict the attainment of a 'oal or ob@ective. () The theory of constraints focuses on ma0imi4in' the rate of throu'hput contribution &hile minimi4in' investment and other operatin' costs. A. *nly A. . *nly . C. either A nor is true. !. oth A and are true. !. oth A and are true.
2. The theory of constraints focuses on ma0imi4in' throu'hput contribution mar'in &hile minimi4in' all of the follo&in' e0cept A. sellin' e0penses per unit sold. . production bottlenecks. C. investment in buildin's. !. investment in inventories. A. sellin' e0penses per unit sold.
-=. The AB Company manufactures kitchen utensils. The company is currently producin' &ell belo& its full capacity. The 5 Company has approached AB &ith an o"er to buy 2=%=== utensils at <=.7 each. AB sells its utensils &holesale for <=.?7 each the avera'e cost per unit is <=.?-% of &hich <=.12 is /0ed costs. $f AB &ere to accept 5s o"er% &hat &ould be the increase in ABs operatin' pro/ts A. <3== . == C. <1%8== !. <2%=== #. ABs operatin' pro/ts &ill not increase as a result of acceptin' the special order. . ==
-1. The MD Company has 'athered the follo&in' information for a unit of its most popular product:
The above cost information is based on 3%=== units. A forei'n distributor has o"ered to buy 1%=== units at a price of <18 per unit. This special order &ould not disturb re'ular sales. 5ariable shippin' and other sellin' e0penses &ould be an additional <1 per unit for the special order. $f the special order is accepted% MDs operatin' pro/ts &ill increase by: A. <1%===.
. <1%8==. C. <2%===. !. <3%===. #. <7%===. !. <3%===.
-2. The follo&in' information relates to the Tram Company for the upcomin' year.
The cost of 'oods sold includes <1%2==%=== of /0ed manufacturin' overhead the operatin' e0penses include <1==%=== of /0ed marketin' e0penses. A special order o"erin' to buy 7=%=== units for <.7= per unit has been made to Tram. 9ortunately% there &ill be no additional operatin' e0penses associated &ith the order and Tram has suEcient capacity to handle the order. Fo& much &ill operate pro/ts be increased if Tram accepts the special order A. <27%=== . <82%7== C. <1==%=== !. <127%=== #. *peratin' pro/ts &ill not increase as a result of acceptin' the special order. C. <1==%===
--. The ;e'al akin' Company is considerin' the e0pansion of its business into door,to,door delivery service. This &ould reGuire an additional <12%7== in labor costs per month. Company,o&ned vehicles no& used to make mornin' deliveries to restaurants could be used in the afternoons to make the home deliveries. Fo&ever% it is estimated that an additional <7%=== &ould be reGuired per month for 'as% oil% and maintenance. $t is further estimated that the home delivery use of the trucks &ould be allocated 37> of the e0istin' <8%7== /0ed vehicle costs. hat is the di"erential delivery cost per month for e0pandin' into the home delivery market A. <12%7== . <1%7== C. <1%7= !. <2=%327 . <1%7==
-3. The lade !ivision of A0e Company produces hardened steel blades. *ne, third of lades output is sold to the 9orestry Hroducts !ivision of A0e the remainder is sold to outside customers. lades estimated operatin' pro/t for the year is:
The 9orestry !ivision has an opportunity to purchase 1=%=== blades of the same Guality from an outside supplier on a continuin' basis. The lade !ivision cannot sell any additional products to outside customers. +hould the A0e Company allo& its 9orestry !ivision to purchase the blades from the outside supplier at <1.27 per unit A. o makin' the blades &ill save A0e <1%7==. . Ies buyin' the blades &ill save A0e <1%7==. C. o makin' the blades &ill save A0e <2%7==. !. Ies buyin' the blades &ill save A0e <2%7==. C. o makin' the blades &ill save A0e <2%7==.
-7. The lade !ivision of A0e Company produces hardened steel blades. *ne, third of lades -=%=== unit output is sold to the 9orestry Hroducts !ivision of A0e the remainder is sold to outside customers. lades estimated operatin' pro/t for the year is:
The 9orestry !ivision has an opportunity to purchase 1=%=== blades of the same Guality from an outside supplier on a continuin' basis. The purchase price &ould be <1.27. $f the lade !ivision is no& operatin' at full capacity and can sell all its units to outside customers at the present sellin' price% &hat is the di"erential cost to A0e of reGuirin' that the blades be made internally and sold to the 9orestry !ivision A. <2%7== . <7%=== C. <%7== !. <1=%=== C. <%7==
-8. The CJH Company produces 1=%=== units of item +1= annually at a total cost of <1=%===.
The KIB Company has o"ered to supply 1=%=== units of +1= per year for <1? per unit. $f CJH accepts the o"er% <3 per unit of the /0ed overhead &ould be saved. $n addition% some of CJHs facilities could be rented to a third party for <17%=== per year. hat are the relevant costs for the LmakeL alternative A. <18=%=== . <187%===
C. <17%=== !. <1?7%=== C. <17%===
-. The CJH Company produces 1=%=== units of item +1= annually at a total cost of <1=%===.
The KIB Company has o"ered to supply 1=%=== units of +1= per year for <1? per unit. $f CJH accepts the o"er% <3 per unit of the /0ed overhead &ould be saved. $n addition% some of CJHs facilities could be rented to a third party for <17%=== per year. At &hat price &ould CJH be indi"erent to KIBs o"er A. <1.== . <1.7= C. <1?.7= !. <1.7= . <1.7=
-?. !i"erential costs are (CMA adapted) A. the di"erence in total costs that result from selectin' one choice instead of another. . the pro/t fore'one by selectin' one choice instead of another. C. a cost that continues to be incurred in the absence of activity. !. a cost common to all choices in Guestions and not clearly allocable to any of them. A. the di"erence in total costs that result from selectin' one choice instead of another.
-. The period of time over &hich capacity &ill be unchan'ed is A. lon' run . sunk cost C. short run !. product life cycle C. short run
3=. The time from initial research and development to the time that support to the customer ends is the A. product life cycle . short run
C. tar'et time !. predatory price A. product life cycle
31. The price based on customers perceived value for the product and the price that competitors char'e: A. predatory price . tar'et price C. tar'et cost !. dumpin' price . tar'et price
32. The practice of settin' price belo& cost &ith the intent to drive competitors out of business: A. predatory pricin' . tar'et pricin' C. tar'et costin' !. peak,load pricin' A. predatory pricin'
3-. The practice of settin' prices hi'hest &hen the Guantity demanded for the product approaches capacity: A. predatory pricin' . tar'et pricin' C. peak,load pricin' !. price /0in' C. peak,load pricin'
33. A'reement amon' business competitors to set prices at a particular level: A. predatory pricin' . tar'et pricin' C. peak,load pricin' !. price /0in' !. price /0in'
37. #0portin' a product to another country at a price belo& domestic cost: A. dumpin' . tar'et pricin'
C. peak,load pricin' !. price /0in' A. dumpin'
38. A tar'et cost is computed as A. cost to manufacture plus a desired markup . cost to manufacture plus desi'nated sellin' e0penses C. market &illin'ness to pay , cost to manufacture !. market &illin'ness to pay , desired pro/t !. market &illin'ness to pay , desired pro/t
3. The operations of link Corporation are divided into the ill !ivision and the Aloy !ivision. Hro@ections for the ne0t year are as follo&s:
*peratin' income for link Corporation as a &hole if the Carter !ivision &ere dropped &ould be A. <1--%=== . <112%=== C. <1%=== !. <3%=== !. <3%===
3?. ryon $ndustries manufactures 2=%=== components per year. The manufacturin' cost of the components &as determined as follo&s:
An outside supplier has o"ered to sell the component for <1. $f ryon purchases the component from the outside supplier% the manufacturin' facilities &ould be unused and could be rented out for <1=%===. $f ryon purchases the component from the supplier instead of manufacturin' it% the e"ect on income &ould be: A. a <=%=== increase . a <7=%=== decrease C. a <1=%=== decrease !. a <-=%=== increase C. a <1=%=== decrease
3. Albany $ndustries produces t&o products. $nformation about the products is as follo&s:
The companys /0ed costs totaled <=%===% of &hich <17%=== can be directly traced to Hroduct 1 and <3=%=== can be directly traced to Hroduct 2. The e"ect on the /rms pro/ts if Hroduct 2 is dropped &ould be a A. <1=%=== increase . <-7%=== increase C. <-7%=== decrease !. <1=%=== decrease !. <1=%=== decrease
7=. hich of the follo&in' costs &ould continue to be incurred even if a se'ment is eliminated A. !irect /0ed e0penses . 5ariable cost of 'oods sold C. Common /0ed costs !. 5ariable sellin' and administrative e0penses C. Common /0ed costs
71. orest +hoe Company has t&o retail stores% one in Albertville and the other in loomer. The Albertville store had sales of <1==%===% a contribution mar'in of -7 percent% and a se'ment mar'in of <13%===. The companys t&o stores have total sales of <27=%===% contribution mar'in of -2 percent% and a total se'ment mar'in of <-1%===. The contribution mar'in for the loomer store must have been A. <87%=== . <1=%=== C. <1=7%=== !. <37%=== !. <37%===
72. Miller $ndustries has t&o divisions: the est !ivision and the #ast !ivision. $nformation relatin' to the divisions for the year @ust ended is as follo&s:
Common /0ed e0penses have been allocated eGually to each of the t&o divisions. Millers se'ment mar'in for the est !ivision is A. <17=%=== . <1=2%===
C. <-=%=== !. <11=%=== . <1=2%===
7-. Chetek $ndustries manufactures 17%=== components per year. The manufacturin' cost of the components &as determined to be as follo&s:
Assume that the /0ed manufacturin' overhead reects the cost of Cheteks manufacturin' facility. This facility cannot be used for any other purpose. An outside supplier has o"ered to sell the component to Chetek for <-3. $f Chetek $ndustries purchases the component from the outside supplier% the e"ect on income &ould be a A. <-=%=== decrease . <-=%=== increase C. <=%=== decrease !. <=%=== increase A. <-=%=== decrease
73. Chetek $ndustries manufactures 17%=== components per year. The manufacturin' cost of the components &as determined to be as follo&s:
Assume Chetek $ndustries could avoid <3=%=== of /0ed manufacturin' overhead if it purchases the component from an outside supplier. An outside supplier has o"ered to sell the component for <-3. $f Chetek purchases the component from the supplier instead of manufacturin' it% the e"ect on income &ould be a A. <8=%=== increase . <1=%=== increase C. <1==%=== decrease !. <13=%=== increase . <1=%=== increase
77. The operations of +uperior Corporation are divided into the orthrup !ivision and the Fa&ley !ivision. Hro@ections for the ne0t year are as follo&s:
*peratin' income for +uperior Corporation% as a &hole% if the Fa&ley !ivision &ere dropped &ould be A. <37%===
. =%=== C. <1==%=== !. <12=%=== A. <37%===
78. The follo&in' information relates to a product produced by Ashland Company:
9i0ed sellin' costs are <1%===%=== per year. 5ariable sellin' costs of <3 per unit sold are added to cover the transportation cost. Althou'h production capacity is 7==%=== units per year% Ashland e0pects to produce only 3==%=== units ne0t year. The product normally sells for <3= each. A customer has o"ered to buy 8=%=== units for <-= each. The customer &ill pay the transportation char'e on the units purchased. $f Ashland accepts the special order% the e"ect on income &ould be a A. <8=%=== increase . <1?=%=== increase C. <32=%=== increase !. <8==%=== decrease C. <32=%=== increase
7. $f there is e0cess capacity% the minimum acceptable price for a special order must cover A. only variable costs associated &ith the special order. . variable and /0ed manufacturin' costs associated &ith the special order. C. variable and incremental /0ed costs associated &ith the special order. !. variable costs and incremental /0ed costs associated &ith the special order% plus the contribution mar'in usually earned on re'ular units. C. variable and incremental /0ed costs associated &ith the special order.
7?. The in&ood Company manufactures t&o products: N and T. The costs and revenues are as follo&s:
Total demand for Hroduct N is 13%=== units and for Hroduct T is %=== units. Machine time is a scarce resource. !urin' the year% 73%=== machine hours are available. Hroduct N reGuires 7 machine hours per unit% &hile Hroduct T reGuires - machine hours per unit. Fo& many units of Hroducts N and T should in&ood produce
A. a . b C. c !. d !. d (73==O===)
7. ;os&ell $nc has 7%3== machine hours available each month. The follo&in' information on the companys three products is available:
$f market demand e0ceeds the available capacity% in &hat seGuence should orders be /lled to ma0imi4e the companys pro/ts A. Hroduct 1 /rst% product 2 second% and product - third . Hroduct 2 /rst% product - second% and product 1 third C. Hroduct - /rst% product 2 second% and product 1 third !. Hroduct - /rst% product 1 second% and product 2 third . Hroduct 2 /rst% product - second% and product 1 third
8=. erner $nc has 8%8== machine hours available each month. The follo&in' information on the companys three products is available:
$f market demand e0ceeds the available capacity% in &hat seGuence should orders be /lled to ma0imi4e the companys pro/ts A. Hroduct K /rst% product B second% and product I third . Hroduct I /rst% product B second% and product K third C. Hroduct I /rst% product K second% and product B third !. Hroduct B /rst% product K second% and product I third A. Hroduct K /rst% product B second% and product I third
81. The Clapton Company manufactures t&o products: Alpha and eta. The costs and revenues are as follo&s:
Total demand for Alpha is 1=%=== units and for eta is 8%=== units. Machine hours is a scarce resource. !urin' the year% 7=%=== machine hours are available. Alpha reGuires 3 machine hours per unit% &hile eta reGuires 2.7 machine hours per unit.
Fo& many units of Alpha and eta should Clapton produce
A. a . b C. c !. d C. c (?7=O8===)
82. The Clapton Company manufactures t&o products: Alpha and eta. The costs and revenues are as follo&s:
Total demand for Alpha is 1=%=== units and for eta is 8%=== units. Machine time is a scarce resource. !urin' the year% 7=%=== machine hours are available. Alpha reGuires 3 machine hours per unit% &hile eta reGuires 2.7 machine hours per unit. hat is the ma0imum contribution mar'in Clapton can achieve durin' a year A. <333%27= . <1%=13%=== C. <3??%=== !. 77%7== A. <333%27=
8-. Burek $nc has 7%3== machine hours available each month. The follo&in' information on the companys three products is available:
The market demand is limited to 2%=== units of each of the three products. Fo& many units of each should Burek produce and sell
A. a . b C. c !. d C. c (=O2===O13==)
83. Burek $nc has 7%3== machine hours available each month. The follo&in' information on the companys three products is available:
The market demand is limited to 2%=== units of each of the three products. hat is the ma0imum possible contribution mar'in that Burek could make in any month A. 1%=== . <38%7== C. <3-%=== !. <71%=== . <38%7==
87. inton $nc has 12%=== machine hours available each month. The follo&in' information on the companys four products is available:
$f market demand e0ceeds the available capacity% in &hat seGuence should orders be /lled to ma0imi4e the companys pro/ts A. Hroduct /rst% product K second% product B third% and product I last. . Hroduct B /rst% product second% product K third% and product I last. C. Hroduct K /rst% product second% product I third% and product B last. !. Hroduct K /rst% product B second% product I third% and product last. A. Hroduct /rst% product K second% product B third% and product I last.
88. The A0le !ivision of ecker Company produces a0les for o",road sport vehicles. *ne,third of A0les output is sold to an internal division of ecker the remainder is sold to outside customers. A0les estimated operatin' pro/t for the year is:
The internal division has an opportunity to purchase 1=%=== a0les of the same Guality from an outside supplier on a continuin' basis. The A0le !ivision cannot sell any additional products to outside customers. +hould the ecker Company allo& its internal division to purchase the a0les from the outside supplier at <1-.== per unit A. o makin' the a0les &ill save ecker <17%===. . Ies buyin' the a0les &ill save ecker <17%===. C. o makin' the a0les &ill save ecker <-=%===. !. Ies buyin' the a0les &ill save ecker <-=%===. C. o makin' the a0les &ill save ecker <-=%===.
8. The A0le !ivision of ecker Company produces a0les for o",road sport vehicles. *ne,third of A0les -=%=== unit output is sold to an internal division of ecker the remainder is sold to outside customers. A0les estimated operatin' pro/t for the year is:
The internal division has an opportunity to purchase 1=%=== a0les of the same Guality from an outside supplier on a continuin' basis. The purchase price &ould be <1-.==. $f the A0le !ivision is no& operatin' at full capacity and can sell all its units to outside customers at the present sellin' price% &hat is the di"erential cost to ecker of reGuirin' that the a0les be made internally and sold to the internal division A. <27%=== . <7=%=== C. <=%=== !. <1==%=== C. <=%===
8?. The A0le !ivision of ecker Company produces a0les for o",road sport vehicles. *ne,third of A0les -=%=== unit output is sold to an internal division of ecker the remainder is sold to outside customers. A0les estimated operatin' pro/t for the year is:
The internal division has an opportunity to purchase 1=%=== a0les of the same Guality from an outside supplier on a continuin' basis. The purchase price &ould be <1-.==. $f the A0le !ivision is no& operatin' at full capacity and can sell all its units to outside customers at the present sellin' price% &hat is the minimum sellin' price that A0le should accept from the internal division A. <1=.== . <1-.== C. <17.== !. <2=.== !. <2=.==
8. The A0le !ivision of ecker Company produces a0les for o",road sport vehicles. *ne,third of A0les output is sold to an internal division of ecker the remainder is sold to outside customers. A0les estimated operatin' pro/t for the year is:
The internal division has an opportunity to purchase 1=%=== a0les of the same
Guality from an outside supplier on a continuin' basis. The A0le !ivision cannot sell any additional products to outside customers. hat is the minimum sellin' price that A0le should accept from the internal division A. <1=.== . <1-.== C. <17.== !. <7=.== A. <1=.==
=. The remmer Company produces 7%=== units of item BN? annually at a total cost of <2==%===.
The !aisy Company has o"ered to supply all 7%=== units of BN? per year for <-7 per unit. $f remmer accepts the o"er% per unit of the /0ed overhead &ould be saved. $n addition% some of remmers leased facilities could be vacated% reducin' lease payments by <-=%=== per year. hat are the relevant costs for the LmakeL alternative A. <12=%=== . <17%=== C. <1=%=== !. <2==%=== C. <1=%===
1. The remmer Company produces 7%=== units of item BN? annually at a total cost of <2==%===.
The !aisy Company has o"ered to supply all 7%=== units of BN? per year for <-7 per unit. $f remmer accepts the o"er% per unit of the /0ed overhead &ould be saved. $n addition% some of remmers leased facilities could be vacated% reducin' lease payments by <-=%=== per year. At &hat price &ould remmer be indi"erent to !aisys o"er A. <3= . <-? C. <-7 !. <23 . <-?
2. The +peedy !elivery +ervice is considerin' the e0pansion of its business into afternoon retail delivery service. This &ould reGuire an additional <27%=== in
labor costs per month. Company,o&ned vehicles no& used to make mornin' deliveries to local manufacturers could be used in the afternoons to make retail deliveries. Fo&ever% it is estimated that an additional <1=%=== &ould be reGuired per month for 'as% oil% and maintenance. $t is further estimated that the retail delivery use of the trucks &ould be allocated 37> of the e0istin' <1-%=== /0ed vehicle costs. hat is the di"erential delivery cost per month for e0pandin' into the retail delivery market A. <27%=== . <-7%=== C. <-%7== !. <3=%?7= . <-7%===
-. The emaire Company manufactures &irin' tools. The company is currently producin' &ell belo& its full capacity. The oisvert Company has approached emaire &ith an o"er to buy 1=%=== tools at <1.7 each. emaire sells its tools &holesale for <1.?7 each the avera'e cost per unit is <1.?-% of &hich <=.2 is /0ed costs. $f emaire &ere to accept oisverts o"er% &hat &ould be the increase in emaires operatin' pro/ts A. == . <1%=== C. <1%== !. <2%== #. emaires operatin' pro/ts &ill not increase as a result of acceptin' the special order. C. <1%==
3. The uchanan Company has 'athered the follo&in' information for a unit of its most popular product:
The above cost information is based on 1=%=== units. A distributor has o"ered to buy 2%=== units at a price of <-2 per unit. This special order &ould not disturb re'ular sales. +pecial packa'in' and other sellin' e0penses &ould be an additional <=.7= per unit for the special order. $f the special order is accepted% uchanans operatin' pro/ts &ill increase by: A. <3%===. . <8%3==. C. %===. !. <1%===. #. <2=%===. !. <1%===.
7. The uchanan Company has 'athered the follo&in' information for a unit of its most popular product:
The above cost information is based on 1=%=== units. A distributor has o"ered to buy 2%=== units at a price of <-2 per unit. The distributor claims this special order &ould not disturb re'ular sales at <32. +pecial packa'in' and other sellin' e0penses &ould be an additional <=.7= per unit for the special order. Fo& many units of re'ular sales could be lost before this contract is not pro/table A. = units. . 7= units. C. 1% === units. !. 2%=== units. #. 1=%=== units. . 7= units.
8. The follo&in' information relates to the Ja0 Company for the upcomin' year.
The cost of 'oods sold includes <2%3==%=== of /0ed manufacturin' overhead the operatin' e0penses include <2==%=== of /0ed marketin' e0penses. A special order o"erin' to buy 7=%=== units for <17.== per unit has been made to Ja0. 9ortunately% there &ill be no additional operatin' e0penses associated &ith the order and Ja0 has suEcient capacity to handle the order. Fo& much &ill operatin' pro/ts increase if Ja0 accepts the special order A. <7=%=== . <127%=== C. <2==%=== !. <27=%=== #. *peratin' pro/ts &ill not increase as a result of acceptin' the special order. C. <2==%===
. The follo&in' information relates to the Ja0 Company for the upcomin' year.
The cost of 'oods sold includes <2%3==%=== of /0ed manufacturin' overhead the operatin' e0penses include <2==%=== of /0ed marketin' e0penses. A special order o"erin' to buy 7=%=== units for <17.== per unit has been made to Ja0. 9ortunately% there &ill be no additional operatin' e0penses associated &ith the order ho&ever% Ja0 is operatin' at full capacity. Fo& much &ill operatin' pro/ts increase if Ja0 accepts the special order A. <7=%===
. <127%=== C. <2==%=== !. <27=%=== #. *peratin' pro/ts &ill not increase as a result of acceptin' the special order. #. *peratin' pro/ts &ill not increase as a result of acceptin' the special order.
?. The follo&in' information relates to a product produced by Ashland Company:
9i0ed sellin' costs are <1%===%=== per year. Althou'h production capacity is 7==%=== units per year% Ashland e0pects to produce only 3==%=== units ne0t year. The product normally sells for = each. A customer has o"ered to buy 8=%=== units for <8= each. The customer &ill pay the transportation char'e on the units purchased. $f Ashland accepts the special order% the e"ect on income &ould be a A. <12=%=== increase . <-8=%=== increase C. 3=%=== increase !. <1%2==%=== decrease C. 3=%=== increase
. The operations of Pad&ell Corporation are divided into the link !ivision and the lur !ivision. Hro@ections for the ne0t year are as follo&s:
*peratin' income for Pad&ell Corporation as a &hole if the lur !ivision &ere dropped &ould be A. <88%7== . <78%=== C. <37%7== !. <23%7== !. <23%7==
?=. The operations of Pad&ell Corporation are divided into the link !ivision and the lur !ivision. Hro@ections for the ne0t year are as follo&s:
$f the lur !ivision &ere dropped% link !ivisions sales &ould increase by -=>. $f this happened% the operatin' income for Pad&ell Corporation as a &hole &ould
be A. <2%?== . <78%=== C. <%1== !. <7%17= C. <%1==
?1. hich of the follo&in' statements re'ardin' di"erential costs is (are) true (A) The full cost fallacy occurs &hen a decision,maker includes /0ed manufacturin' overhead in the products cost. () hen decidin' &hether or not to accept a special order% a decision,maker should focus on di"erential costs instead of full costs. A. *nly A. . *nly . C. either A nor is false. !. oth A and are true. !. oth A and are true.
?2. hich of the follo&in' statements re'ardin' special orders is (are) false (A) The primary decision for special orders is determinin' &hether the di"erential revenue is 'reater than the di"erential costs associated &ith the order. () The di"erential analysis approach to pricin' for special orders &ill al&ays lead to underpricin' in the lon',run because /0ed costs are not included in the analysis. A. *nly A. . *nly . C. either A nor is false. !. oth A and are true. . *nly .
?-. hich of the follo&in' costs are not considered in a di"erential analysis for a make,or,buy decision A. $ndirect materials and indirect labor if the item is purchased . !irect materials and direct labor if the item is manufactured internally C. 5ariable overhead if the item is purchased !. 9i0ed overhead that &ill continue if the item is purchased #. 9i0ed overhead that can be avoided if the item is purchased !. 9i0ed overhead that &ill continue if the item is purchased
?3. 9or the past /ve years% the +elin Company has produced and sold freGuency meters to 'enetics labs throu'hout the 6nited +tates. ;ecently% a stron' competitor has entered the market and +elin is considerin' &hether it should continue to produce and sell the freGuency meters. The follo&in' information has been 'athered to assist mana'ement in their decision: A) +ales volume (units) is estimated to drop by 27> once the competitor becomes fully operational. ) The eGuipment used to produce the meters &as purchased /ve,years a'o for <1%7==%===. C) The space no& used to produce the meters &ould be reallocated to eliminate the need to rent &arehouse space. !) Three of the employees &ho produce meters &ould be reassi'ned to the oscillator division. hich of the items listed above is (are) relevant to the decision to continue the production and sale of the freGuency meters A. A and C. . and C. C. C and !. !. A% % and !. #. % C% and !. A. A and C.
?7. hich of the follo&in' statements about the theory of constraints is (are) true (A) The theory of constraints focuses on determinin' the optimal product mi0 &hen t&o or more resources restrict the attainment of a 'oal or ob@ective. () The theory of constraints focuses on ma0imi4in' the rate of throu'hput contribution &hile ma0imi4in' investment and other operatin' costs. A. *nly A. . *nly . C. either A nor is true. !. oth A and are true. C. either A nor is true.