Chapter 8 Dynamic Module

Relevant information ________.

is expected future data and differs amongst the alternatives

Sandy's Sewing Service has 500 damaged silk remnants that cost $25,000. The damaged silk remnants could be sold as is for $10,000, or repaired for $15,000 and then sold for $55,000.
Compute the opportunity cost of selling the damaged silk remnants without

$40,000

Which of the following choices represents the computation of contribution margin per unit of a constraint?

Contribution margin per unit x Units per constraint

A managerial accountant needs to make a sell or continue to process decision about a product. The managerial accountant should continue manufacturing the product instead of selling the product if ________.

the extra revenue is greater than the extra cost to continue manufacturing a product

Mike's Auto Service reported information about the cost associated to sell as is or process further. The managerial accountant recorded $150,000 of extra revenue from selling parts.
State whether the managerial accountant should "Process Further" or "Do N

Process further because the extra revenue from processing further is more than extra cost of processing further

A segment margin income statement ________.

contains NO allocation of common fixed costs on the statement

A sunk cost ________.

include costs that have been incurred in the past and cannot be changed

Cindy's Manufacturing Services produces and manufactures two types of products. Product I uses 800 machine hours to produce, and Product II uses 2 machine hours to produce.
What is the total contribution margin at full capacity of the combined products?
P

$299,500

Sam's Auto Repair reported total cost to produce parts of $50,000. The managerial accountant needs a gross profit of $5,500 to meet monthly expenses.
What is the cost-plus price?

$55,500

Offshoring ________.

refers to a company having work performed overseas

Which of the following is NOT considered when determining whether to sell or process further?

How much revenue will be earned on all other product lines.

Which of the following is NOT a characteristic of a price-taker?

Less competition

Sandy's Manufacturing Service reported fixed manufacturing overhead of $3,783,000, and 3,900,000 total units. The variable manufacturing costs were $1.50 per unit.
What is the cost per unit using absorption costing?

$2.47

Which of the following is TRUE about a relevant costs and information?

A manager focuses only on relevant costs and benefits, which include costs that differ amongst alternatives and impact the future

Tina's Manufacturing Company reported total variable cost of $1,000,000. The managerial accountant reported 50,000 total number of units. What is the target variable cost per unit?
Martha's Delivery Service
Target Variable Cost per Unit
Target total cost

$20

________ refers to the result of operating income or loss for each individual product line.

Segment margin income

Which of the following is NOT relevant in the thought process to make a "Sell as Is" or "Process Further" decision?

Identifying all costs except the cost of extra revenue from processing

A special order ________.

occurs when a customer requests a one-time order at a reduction in the sales price

________ starts with the product's total costs and adds a desired profit to determine a cost-plus price.

Cost-plus pricing

Josh's Manufacturing Company reported fixed manufacturing overhead of $2,500,000, and 2,600,000 total units. The variable manufacturing costs were $1.50 per unit.
What is the cost per unit using absorption costing?

$.54

Unavoidable fixed costs ________.

include fixed costs that continue to be incurred even if the product line is discontinued

Which of the following is NOT a characteristic of a price-setter?

Heavy competition

Each of the following includes correct concepts a manager should consider when implementing a special order EXCEPT ________.

existing fixed costs

Stripes and Stars Manufacturing produces and manufactures two types of products. Product I uses 600 machine hours to produce, and Product II uses 2 machine hours to produce.
What is the total contribution margin at full capacity of each product combined?

$273,000

Which of the following is a TRUE statement about a special order?

A special order occurs when a customer requests a one-time order at a reduction in the sales price

Sal's Manufacturing manufactures and sells couches and tables. The following data was reported by the managerial accountant. The company can manufacture two couches per machine hour and one table per machine hour. The company's production capacity is 800

$500

Which of the following is NOT a potential drawback of outsourcing?

Outsourcing is a lower cost alternative

Sandspring Resorts manufactures pool supplies. Ladders and diving boards are produced locally and sold online. Based on the information listed below, what is the contribution margin ratio for ladders and diving boards?
Ladders
Diving Boards
Sales price
$1

33.33%; 40%

Page Incorporated manufactures automotive parts that sell for $80 each. The manager reported 280 defective parts in inventory, which cost $50 to reproduce. The manager can sell the defective parts for $20 each, or process the parts further for $30 each, a

Repair the defective parts for an $8,400 net increase in operating income

A special order should be rejected when ________.

the price of the special order is NOT more than variable costs of the order

Tim's Manufacturing manufactures and sells sofas and futons. The following data was reported by the managerial accountant. The company can manufacture 2 sofas per machine hour and 1 futon per machine hour. The company's production capacity is 700 machine

$700

Marla's Antique Shoppe reported total cost to produce authentic antiques of $10,500,000. The managerial accountant needs a gross profit of $50,000 to meet monthly expenses.
What is the cost-plus price?

$10,550,000

Blake's Repair Services has 2,000 damaged radios that cost $40,000. The radios could be sold as is for $20,000, or repaired for $30,000 and then sold for $65,000.
Compute the opportunity cost of selling the radios without the repairs.

$35,000

Which of the following is a TRUE concept about what a manager should consider when a customer requests a one-time special order?

Available capacity

Jim's Tree Service may need to replace a log-cutting machine which is currently used in the tree-removal process. The managerial accountant reported the information listed below. Which of the following costs is irrelevant to the replacement decision?
Old

Current age of the machine (loss of life of machine that has passed)

________ costs include costs that may be eliminated as a result of discontinuing the product

Avoidable fixed

Stripes and Stars Manufacturing produces and manufactures sweat shirts and socks. Based on the information listed below, what is the contribution margin ratio for sweat shirts and socks?
Sweat Shirts
Socks
Sales price
$20
$18
Less: Variable expenses
($12)

40%; 67%

Which of the following is NOT a benefit of outsourcing?

Outsourcing is a higher cost alternative

Rachel's Automotive Service may need to replace a diagnostic machine which is currently used in the production process. The managerial accountant reported the information listed below. Which of the following costs is irrelevant to the replacement decision

Original old machine cost

When should a manager accept a special order job?

The special reduced sales price is high enough to cover the incremental costs of filling the order