ACC 202 Ch 13 HW and Quiz-BURGESS

Relevant cost

High Roller Inc. is trying to decide whether to buy a private jet or to lease one. The finder's fee is incurred only if the private jet is bought. The finder's fee is what type of cost for this decision? Sunk cost Unavoidable cost Relevant cost Irrelevant cost

$120,000

Nakatomi Corporation produces 10,000 units of Product A at a cost of $20 per unit. A detailed breakdown of the cost is below. VC=12 Allocated MO= 3 Allocated general admin costs=5 12+3+5=20 Outside supplier's offer = 17 What are the total relevant cost of producing the units internally? $150,000 $120,000 $200,000 $170,000

$42

Prairie, Inc. produces a single product. It has an annual capacity of 10,000 units, but currently uses only 80% of it. Each unit is sold for $50 and requires direct material worth $30 and direct labor worth $5. Manufacturing overhead cost is $10 per unit of which 70% is variable. What is Prairie's total incremental cost incurred to produce each unit? $30 $42 $35 $45

Avoidable

Rent paid for the building that houses only the Orange County division

$3,000 profit

Superware, Inc. produces multiple products out of a common input. Geratin is one such product, which has a sales value of $15,000 at the split-off point. Joint costs allocated to Geratin are $12,000. Sales value of Geratin increases to $25,000 after further processing, and this processing will cost $7,000. What is the net profit or loss if Superware processes the product further? ($3,000) loss $3,000 profit $20,000 profit $18,000 profit

vertical integration

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service is called ________. opportunity cost vertical integration relevant cost avoidable cost

Unavoidable

Amount of rent paid to lease a private jet for use by the company's mgt that is allocated to the orange county division

Unavoidable

Depreciation expense on previously purchased machinery that is used in the Orange County division; machinery will have no other use or resale value if drooped

opportunity cost

The potential benefit that is given up when one alternative is selected over another is called ________. relevant cost avoidable cost differential cost opportunity cost

Whether the dfferential benefits exceed the differential costs

What of the following forms the basis for a financial advantage when making a business decision? Whether opportunity costs are present Whether irrelevant costs and benefits arise Whether the dfferential benefits exceed the differential costs Whether alternatives exist

Tightening the constraint

When a company cannot fully satisfy demand because of a constraint, which of the following describes an action that should NOT be taken? Relaxing the constraint Tightening the constraint Investing to improve the capacity of the bottleneck Reducing the number of defective units produced through the bottleneck

volume trade-off decisions

When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to ________. keep or drop decisions volume trade-off decisions sell or process further decisions make or buy decisions

Considering only the relevant costs gives results a different answer than that obtained when all costs are considered.

Which of the following statements about using different approaches to analyze alternatives is NOT true? Considering only the relevant costs gives results a different answer than that obtained when all costs are considered. Differential analysis focuses on the future costs and benefits that differ between any two alternatives. Mixing irrelevant costs with relevant costs may cause confusion and distract attention from the information that is critical. Costs and revenues that do not differ between alternatives are irrelevant to decision making.

Special order

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales? Make or buy Special order Sell or process further Keep or drop

joint costs incurred before the split-off point

All of the following are relevant to the sell or process further decision except _______. costs incurred beyond the split-off point revenues at the split-off point joint costs incurred before the split-off point revenues beyond the split-off point

Unavoidable

Avoidable or unavoidable if Orange county is dropped General administrative expenses allocated to Orange County division on the basis of sales dollars

Avoidable

Avoidable or unavoidable if Orange county is dropped wages paid to the Orange country division employees who work directly for this division and will be discharged if division is dropped

sunk costs

Costs that have been incurred and cannot be eliminated regardless of the alternative chosen are ________. sunk costs unavoidable costs relevant costs irrelevant costs