Accounting 202 Home Show Chapter 14-1a Name_________________________ Select the best answer. 1. When it comes to decision making, a managerial accountant is chiefly responsible for the: 2. Which of the following costs can be ignored when making a decision? A) Opportunity costs. B) Differential costs. C) Sunk costs. D) Relevant costs. E) All future costs. 3. The book value of equipment is an example of a(n): A) future cost. B) differential cost. C) comparative cost. D) opportunity cost. E) sunk cost. 4. A factory that makes a part has significant idle capacity. The factory's opportunity cost of making this part is equal to: A) The variable manufacturing cost per unit. B) the fixed manufacturing cost per unit. C) the semivariable cost per unit. D) the total manufacturing cost per unit. E) zero. 5. A special order generally should be accepted if: A) its revenue exceeds allocated fixed costs, regardless of the variable costs
associated with the order. 6. Two months ago, Victory purchased 4,500 pounds of Hydrol, paying $15,300. The market for this product has been very strong since the acquisition, with the market price jumping to $4.05 per pound. (Victory can buy or sell Hydrol at this price.) The company recently received a special-order inquiry, one that would require the use of 4,200 pounds of Hydrol. Which of the following is (are) relevant in deciding whether to accept the special order? A) The 300-pound remaining inventory of Hydrol. Use the following for questions 7 & 8: HiTech manufactures two products: cassette players and compact disc players. The results of operations for 199x follow.
7. HiTech wants to drop the line of cassette players. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no
alternative use of the facilities. What would be the impact on operating income if the cassette players are discontinued? A) $0. 8. Disregard the information presented in question no. 7. If HiTech eliminates the line of cassette players and uses the available capacity to produce and sell an additional 1,500 compact disc players, what would be the impact on operating income? A) $28,000 increase 9. Product costs incurred after the split-off point in a joint processing environment are termed: A) separable processing costs. 10. A firm that decides to emphasize those goods with the highest contribution margin per unit may have made an incorrect decision when the company: A) is highly automated. Answers 1. A 2. C 3. E 4. A 5. B 6. B 7. D 8. C 9. A Which costs can be ignored when making a decision?Irrelevant costs are costs, either positive or negative, that would not be affected by a management decision. Irrelevant costs, such as fixed overhead and sunk costs, are therefore ignored when that decision is made.
Which of the following costs should be ignored when choosing among alternatives?Sunk costs are costs already incurred in the past and will not affect the current decisions. Thus, this type of cost is usually ignored when deciding among alternatives.
Which of the following costs are never relevant in decisionSunk costs are those costs that happened and there is not one thing we can do about it. These costs are never relevant in our decision making process because they already happened.
What costs are used in decisionOpportunity costs are important in decision-making and evaluating alternatives. Decision-making is selecting the best alternative which is facilitated by the help of opportunity costs. Such costs do not require cash outlays and are only imputed costs.
|