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ACC 211 Final Ch 8

Terms in this set (11)

The overall decision of establishing a cost leadership position for a firm is an example of a:
a.tactical decision.
b.strategic decision.
c.variable-term decision.
d.relevant decision.
b.strategic decision.
Alpha Company is evaluating a make-or-buy decision. Which of the following is an example of an irrelevant cost with regard to a make-or-buy decision?
a.Additional labor costs to be incurred when additional units are manufactured
b.Cost of security guard who will guard the finished goods inventory
c.Cost of supervisor who will inspect only the outsourced goods
d.Additional material costs to be incurred when additional units are manufactured
b.Cost of security guard who will guard the finished goods inventory
Jones Inc. is considering dropping its specialty product line and has assembled the following information:
Sales: $190,000
Variable costs: $125,000
Contribution margin: $65,000
Less: Fixed costs: $87,000
Net loss: ($22,000)

$30,000 of the fixed costs is for depreciation on equipment that can be used for other products. What is the benefit or loss of keeping the specialty product line?
a.$(22,000)
b.$8,000
c.$(52,000)
d.$52,000
b.$8,000

Benefit =Contribution margin - (Fixed costs -Depreciation)
= [$65,000 - ($87,000 - $30,000)] =$8,000
In a keep-or-drop decision:
a.segmented reports prepared on a variable-costing basis are important.
b.sunk costs should be included.
c.fixed costs should be ignored.
d.absorption costing income statements should be provided.
a.segmented reports prepared on a variable-costing basis are important.
When a manager makes a sell-or-process-further decision, _____.
a.joint costs should be considered
b.sunk costs resulting from past decisions should be included
c.additional costs and revenues beyond the split-off point should be considered
d.costs before the split-off point should be considered
c.additional costs and revenues beyond the split-off point should be considered
Which of the following is true of constraints that exist in product mix decisions?
a.There exists only one constrained resource at a given point of time.
b.Traders always experience a limitation of machine hours.
c.Multiple constraints can be handled using linear programming.
d.Manufacturers always experience a limitation of raw materials.
c.Multiple constraints can be handled using linear programming.
Constraints:
a.include only limited demand for a product.
b.include only limited skilled labor for a product.
c.neither include limited demand for a product nor limited skilled labor.
d.include both limited demand for a product and limited skilled labor.
d.include both limited demand for a product and limited skilled labor.
Ace Manufacturing produces two products: A and B. Unit contribution margins for A and B are $10 and $60 respectively. Product A uses 1 direct labor hour, and product B uses 4 direct labor hours. Direct labor is Ace's constrained resource. What is the contribution margin per direct labor hour for each product?
a.$10 for Product A and $240 for Product B
b.$240 for Product A and $10 for Product B
c.$10 for Product A and $15 for Product B
d.$240 for Product A and $60 for Product B
c.$10 for Product A and $15 for Product B

Product A = $10 / 1 hour = $10 contribution margin per direct labor hour
Product B = $60 / 4 hours = $15 contribution margin per direct labor hour
Which of the following is true of target pricing?
a.It aims to increase cost on redesigning the product during the production stage.
b.It applies a uniform markup to the cost of a product and then prices are adjust accordingly.
c.It recognizes that only 50% of a product's cost becomes committed by the time it reaches the design stage.
d.It requires the use of fewer materials, labor, and processes during production, delivery and customer service.
d.It requires the use of fewer materials, labor, and processes during production, delivery and customer service.
Which of the following is a method of determining the cost of a product or service based on the price that customers are willing to pay?
a.Target pricing
b.Focused pricing
c.Cost-based pricing
d.Markup pricing
a.Target pricing
If a company has a policy of charging its customers 14% above direct materials and labor costs. The costs incurred are as follows:
Direct materials: $59,000
Direct labor: 5,000
What is the price charged by the company?
a.$73,750
b.$76,750
c.$64,000
d.$72,960
d.$72,960

Price charged = ($59,000 + $5,000) x 114% = $72,960
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