ch14

Indicate the correct order of the decision making process.

Clarify the decision problem matches Choice, 1 1 Collect the data matches Choice, 5 5 Develop a decision model matches Choice, 4 4 Evaluate decision effectiveness matches Choice, 7 7 Identify the alternatives matches Choice, 3 3 Select an alternative matches Choice, 6 6 Specify the criterion matches Choice, 2 2

Which of the following are not relevant to the decision making process?

Future benefits that are the same across alternatives. Costs that are the same across alternatives. Sunk costs.

Which of the following statements is false?

When resources are limited, the product with the highest contribution margin per unit sold should be produced.

Decision making should not incorporate ______ costs.

allocated fixed

Relevant costs in decision making include ______ costs.

avoidable opportunity incremental unit variable

An opportunity cost is the ______.

benefit given up when one alternative is chosen over another

Qualitative characteristics ______.

can be just as important as quantitative measures cannot be expressed effectively in numerical form

The analysis of long-run decisions requires the use of _______ budgeting.

capital

Linear programing should be used to determine use of limited resources when the ______.

company has more than one scarce resource

When resources limit production, the choice of what product(s) to produce should be based on the ______.

contribution margin per unit of limited resource used

Separable process cost is the ______.

cost incurred after the split off point

In considering relevant information, managerial accountants ______.

predict the amounts of future costs and benefits use estimates of cost behavior based on historical data determine what costs and benefits will be incurred in the future

To be considered relevant, information must

involve a future event

Future costs and benefits that do not differ between alternatives are ______ costs to a decision.

irrelevant

When the same decision must be made over and over again ______.

it is worthwhile to keep an ongoing file of relevant information large amounts of historical data is available on which to make predictions

A production process that results in two or more products is called a(n)

joint

In evaluating decision alternatives, opportunity costs are ______.

just as relevant as out of pocket costs

With a company has multiple scarce resources, a powerful mathematical tool called

linear Blank 2: programming

When a company has inventory on hand for which it has no further use or must be modified to be used further, relevant costs related to the decision of what to do with the inventory include ______.

modification costs the disposal value

The potential benefit given up when one action precludes a different action is called a(n)

opportunity

Ways to manage a constraint include ______.

outsource bottleneck operations add additional shifts or work overtime add additional equipment to increase capacity

To make optimal decisions, managerial performance should be based upon ______.

the same criterion used for decision making

When managers are criticized for past decisions ______.

they may begin treating sunk costs as relevant to future decisions

One of the common errors in identification of relevant costs is ______ costs.

unitizing fixed

Hickory Manufacturing has been staining & finishing its rocking chairs in house, based upon an estimated volume of 30,000 rocking chairs per month. The information related to the Finishing Department is as follows: Per Unit Total Direct materials $5.00 Direct labor $17.50 Variable manufacturing overhead $6.00 Fixed manufacturing overhead $2.00 $60,000 If Hickory outsources the finishing of the chairs, it can decrease fixed costs by $30,000 per month. Arrow Finishing has offered to do the finishing at a cost of $29.50 per chair. What will be the total effect on Hickory's profits if this offer is accepted?

$0, no change

Jersey Chocolate makes two chocolate bars: Crispy & Creamy. The Crispy bar takes 0.5 machine hours, and the Creamy bar takes 0.8 machine hours. Only 350 machine hours are available per month. The Crispy bar sells for $1, and the Creamy bar sells for $0.75. The variable costs to produce the Crispy and Creamy bars are $.50 and $.35 respectively. The contribution margin per machine hour is ______.

$1 Crispy & $0.50 Creamy

Popping Pops makes two types of popcorn. There is limited time available in the popper. The Cheddar version takes 0.10 hrs per bag, while the Caramel takes 0.20 per bag. Sales and variable cost information are as follows: Cheddar Caramel Selling price per bag $5.49 $6.89 Variable cost per bag $3.11 $3.45

$23.80 for Cheddar & $17.20 for Caramel

Jasmine, Inc. has received a special order for 500 oz. of perfume at $63.00 per oz. The buyer will provide their own perfume vials with labels, thereby saving the company $2 per oz in variable costs. The product normally sells of $82.50 per oz. and the company is currently selling 12,000 oz per month. The following information is available about Jasmine, Inc. Normal sales revenue per oz $82.50 Variable expenses per oz $57.75 Allocated fixed expenses per oz $21.00

$3,625 increase

If Jasmine has no excess capacity, the effect on profits of accepting the special order is a ______. Multiple choice question. $31,500 increase

$8,750 decrease

Jersey Chocolate makes two chocolate bars: Crispy & Creamy. The Crispy bar takes 0.5 machine hours, and the Creamy bar takes 0.8 machine hours. Only 348 machine hours are available per month. The Crispy bar sells for $1, and the Creamy bar sells for $0.75. The variable costs to produce the Crispy and Creamy bars are $.50 and $.35 respectively. If all the time is used to produce Creamy bars, the number of bars that can be produced this month is ______.

435

The sum of the possible values for a random variable, each weighted by its probability is called the

Blank 1: expected Blank 2: value or values

The process of taking possible values times their probability and summing the results to help decease uncertainty is basing a decision on

Blank 1: expected Blank 2: values or value

Popping Pops makes two types of popcorn. There is limited time available in the popper. The Cheddar version takes 0.40 hrs per bag, while the Caramel takes 0.20 per bag. Information about the products are as follows:

Caramel

Which of the following should not be considered when deciding whether or not to eliminate a product?

Unavoidable fixed expenses.

When deciding whether to keep or replace a piece of equipment, sunk costs include ______.

depreciation per year on the old equipment cost of the old equipment

The process of highlighting the most important elements of a problem is ______.

developing a decision model

For information to be relevant, it must

differ among alternatives

A differential cost is the ______.

difference in a cost item under two decision alternatives

A convenient way of summarizing the relative dollar advantage of one alternative over another is to focus on ______ costs.

differential

Costs and benefits that are relevant to a sell or process further decision ______ joint processing costs.

exclude

The theory of constraints (TOC) calls for ______.

finding ways to relax constraints identifying limiting constraints

When no excess capacity exists, ______ are not relevant to the special order decision.

fixed costs per unit

The purpose of evaluating decision effectiveness is to ______.

improve future decisions

The difference between the analysis of long-run vs. short-run decisions is ______.

incorporating the time value of money

When excess capacity exists, relevant costs of a special order decision include ______.

product variable costs other variable costs associated with the special orde

The primary role of a management accountant in a cross functional team is to ______.

provide relevant information

Factors in a decision problem that cannot be expressed effectively in numerical terms are

qualitative

When considering the decision to close an office location, the potential effects on the location's employees is a(n) ______.

qualitative factor

A common method for allocating joints costs among joint products is the ______ method.

relative sales value

Information that is pertinent to a decision is

relevant information

The relative sales value method uses relative ______.

sales value of each product at split off point

A technique for determining what would happen in a decision analysis if a key prediction or assumption proved to be wrong is

sensitivity

A technique for determining what would happen in a decision analysis if a key prediction or assumption proved to be wrong is ______.

sensitivity analysis

Relevant information for a sell or process further decision includes ______.

separable processing cost incremental revenue from processing further

Isolating relevant information is important to ______.

shorten the data-gathering process reduce the likelihood of information overload keep the cost and effort of information gathering down

The point in a production process when the joint products are identifiable as separate products is called the ______ point.

split-off

Costs that have been incurred in the past and can not be changed by any current or future action are called

sunk

When a company has inventory on hand for which it has no further use or must be modified to be used further, relevant costs related to the decision of what to do with the inventory include ______

the disposal value modification costs