Chapter 25 Bullen

In making ​short-term business​ decisions, what should you​ do? A. Use a traditional costing approach. B. Focus on total costs. C. Separate variable from fixed costs. D. Focus only on quantitative factors.

C. Separate variable from fixed costs.

Which of the following costs are irrelevant to business​ decisions? A. Avoidable costs B. Costs that differ between alternatives C. Sunk costs D. Variable costs

C. Sunk costs

When pricing a product or​ service, managers must consider which of the​ following? A. Only period costs B. Only manufacturing costs C. Only variable costs D. All costs

D. All costs

A product or segment should be dropped if it is expected to incur an operating loss for the upcoming period. True False

false

A traditional income statement rather than a contribution margin income statement should be used when considering accepting a special order from a customer. True False

false

If a manufacturer sells more than one​ product, it should emphasize producing the product with the highest contribution margin ratio. True False

false

If the price of special order is greater than the fixed cost per​ unit, then the special order should be accepted by management. True False

false

If the unit cost of outsourcing a product is less than the total cost to produce the product​ in-house, then companies should always outsource the product. True False

false

In order for information to be relevant in making​ short-term business​ decisions, the information must be financial information. True False

false

Manufacturers face several constraints when producing​ products, but constraints are not a factor for merchandisers when choosing their sales mix. True False

false

When companies are​ price-takers they should use a​ cost-plus pricing approach when setting the regular price for their product or service. True False

false

Which of the following costs would be considered as part of a​ product's full​ cost? ​(check all that​ apply) A. Indirect Labor Direct Materials Advertising Cost Direct Labor

A. Indirect Labor Your answer is correct.B. Direct Materials Your answer is correct.C. Advertising Cost Your answer is correct.D. Direct Labor

A joint cost ​(check all that​ apply) A. Is a cost of a production process that yields multiple products B. Is a sunk cost C. Applies to variable costs but not fixed costs D. Is irrelevant to deciding whether to sell a product​ as-is or process it further

A. Is a cost of a production process that yields multiple products B Is a sunk cost D. Is irrelevant to deciding whether to sell a product​ as-is or process it further

Which of the following is a basic question managers ask when setting regular prices for their products and​ services? ​ A. Is our company a​ price-setter or a​ price-taker for a product or​ service B. Is our company a​ cost-leader or a​ cost-setter for a product or​ service? C. What is our​ company's accounts receivable turnover​ ratio? D. What is the​ company's target​ profit?

A. Is our company a​ price-setter or a​ price-taker for a product or​ service D. What is the​ company's target​ profit?

Differential analysis is a method that looks at how​ ________ would differ under each decision alternative. A. Operating income B. Net income C. Return on Investment​ (ROI) D. Total assets

A. Operating income

Which of the following is relevant to​ Kitchenware.com's decision to accept a special order at a lower sale price from a large customer in​ China? A. The cost of shipping the order to the customer B. The cost of​ Kitchenware.com's warehouses in the United States C. Founder Eric​ Crowley's salary D. ​Kitchenware.com's investment in its Web site

A. The cost of shipping the order to the customer

When deciding whether to sell as is or process a product​ further, managers should ignore which of the​ following? A. The costs of processing the product thus far B. The cost of processing further C. The revenue if the product is sold as is D. The revenue if the product is processed further

A. The costs of processing the product thus far

Which of the following would be considered relevant information when determining if a product should be​ discontinued? ​(check all that​ apply) A. The expected contribution margin of the product B. The allocation of shared fixed costs when total fixed costs will remain unchanged whether the product is kept or discontinued C. Direct fixed costs that can be avoided if the product is discontinued D. Unavoidable fixed costs

A. The expected contribution margin of the productC. Direct fixed costs that can be avoided if the product is discontinued

A. revenues that differ between alternatives. B. costs that do not differ between alternatives. C. only variable costs. D. sunk costs in their decisions.

A. revenues that differ between alternatives.

What rule should be followed when a manufacturer is deciding which product it should emphasize​ producing, assuming it makes more than one​ product? A. Emphasize the product with the lowest fixed costs B. Emphasize the product with the highest contribution margin per unit of the constraint C. Emphasize the product with the highest sales price D. Emphasize the product with the lowest variable costs per unit of the constraint

B. Emphasize the product with the highest contribution margin per unit of the constraint

Relevant information is​ _________ data that​ ______ among alternatives. A. ​Past; differ B. Expected​ future; differ C. ​Correct; is the same D. ​Past; is the same

B. Expected​ future; differ

A company should outsource a product if A. The fixed costs of making the product exceed the fixed costs of outsourcing B. The differential costs of making the product exceed the differential costs of outsourcing C. The differential costs of outsourcing the product exceed the differential costs of making the product D. None of the above

B. The differential costs of making the product exceed the differential costs of outsourcing

Which of the following costs would be considered irrelevant when deciding between three alternatives in purchasing a new office​ copier? A. The delivery charge for the new copier B. The original purchase price of the current copier the company owns C. The cost per page of printing with the new copier D. The purchase price of the new copier

B. The original purchase price of the current copier the company owns

When making outsourcing​ decisions, which of the following is​ true? A. Expected use of the freed capacity is irrelevant. B. The variable cost of producing the product​ in-house is relevant. C. The total manufacturing unit cost of making the product​ in-house is relevant. D. Avoidable fixed costs are irrelevant.

B. The variable cost of producing the product​ in-house is relevant.

In deciding whether to drop its sports car product​ line, Horngren Autos should​ consider? ​(check all that​ apply) A. If the decrease in total assets will exceed the decrease in total liabilities if the product line was dropped B. What it would do with the freed manufacturing capacity if the product line was dropped C. What fixed costs would still exist if it were to drop the product line Your answer is correct.D. If the sports car product line currently provides a positive contribution margin for the company

B. What it would do with the freed manufacturing capacity if the product line was dropped

In deciding which product lines to emphasize when a production constraint​ exists, the company should focus on the product line that has the highest A. contribution margin per unit of product. B. contribution margin per unit of the constraint. C. profit per unit of product. D. contribution margin ratio.

B. contribution margin per unit of the constraint.

A company should accept a special order when A. The expected increase in assets exceeds the expected increase in liabilities B. The expected increase in revenues exceeds the expected increase in product costs C. The expected increase in revenues exceeds the expected increase in variable and fixed costs D. The company is already running at full capacity

C. The expected increase in revenues exceeds the expected increase in variable and fixed costs

In deciding whether to drop its electronics product​ line, Smith Company should consider A. how dropping the electronics product line would affect sales of its other products. B. the costs it could save by dropping the product line. C. the revenues it would lose from dropping the product line. D. All of the above.

D. All of the above.

A product or segment should be dropped if the A. Cost of goods sold exceeds the current sales price B. Lost revenues are less than the avoidable fixed costs C. Fixed costs of the product or segment can be avoided D. Lost revenues are less than the total cost savings

D. Lost revenues are less than the total cost savings

Which of the following costs are irrelevant to business​ decisions? A. Overhead costs B. Avoidable costs C. Variable costs D. Sunk costs

D. Sunk costs

When deciding to sell a product​ as-is or process it​ further, managers should ignore which of the​ following? A. The revenue if the product is processed further B. The cost of producing further C. The revenue if the product is sold​ as-is D. The costs of processing the product thus far

D. The costs of processing the product thus far

When making outsourcing​ decisions, which of the following is​ true? A. Expected use of the freed capacity is irrelevant B. Avoidable fixed costs are irrelevant C. The total manufacturing unit cost of making the product​ in-house is relevant D. The variable cost of producing the product​ in-house is relevant

D. The variable cost of producing the product​ in-house is relevant

When companies are​ price-setters, their products and services A. are priced by managers using a​ target-pricing emphasis. B. tend to have a lot of competitors. C. tend to be commodities. D. tend to be unique.

D. tend to be unique.

Which of the following shows the steps in the proper order when managers analyze information to make business​ decisions? A. ​1) Define business​ goals, 2) Gather and analyze relevant​ information, 3) Identify courses of​ action, 4) Choose the best alternative B. ​1) Gather and analyze relevant​ information, 2) Define business​ goals, 3) Identify alternative courses of​ action, 4) Choose the best alternative C. ​1) Identify alternative courses of​ action, 2) Define business​ goals, 3) Gather and analyze relevant​ information, 4) Choose the best alternative D. ​1) Define business​ goals, 2) Identify alternative courses of​ action, 3) Gather and analyze relevant​ information, 4) Choose the best alternative

D. ​1) Define business​ goals, 2) Identify alternative courses of​ action, 3) Gather and analyze relevant​ information, 4) Choose the best alternative

You are trying to decide whether to trade in your inkjet printer for a more recent model. Your usage pattern will remain​ unchanged, but the old and new printers use different ink cartridges. Indicate if the following items are relevant or irrelevant to your​ decision: a. The price of the new printer b. The price paid for the old printer c. The​ trade-in value of the old printer d. Paper cost e. The difference between ink​ cartridges' costs

a. The price of the new printer is relevant. b. The price paid for the old printer is irrelevant. c. The​ trade-in value of the old printer is relevant. d. Paper cost is irrelevant. e. The difference between ink​ cartridges' costs is relevant.

A contribution margin income statement for a product or service is used to help analyze setting a regular price for a product or service using the target pricing method. True False

true

In most​ cases, changing a product mix will not affect fixed costs in the​ short-term. True False

true

It would not be a good business decision to accept a special pricing order when a company is running at full capacity. True False

true

Managers should also include in their analysis the loss of the contribution margin from other products and departments affected by the possible discontinuing of a product. True False

true

Pricing decisions are often considered​ short-term business decisions due to the short product life cycles in many industries. True False

true

Special pricing occurs when a customer requests a​ one-time order at a reduced sales price. True False

true

Target pricing starts with the market price for a product or​ service, then subtracts the​ company's desired profit to determine the maximum allowed full product cost. True False

true

When accepting a special order from a​ customer, companies run the risk of losing​ long-term sales from existing customers. True False

true

When analyzing information to make​ short-term decisions, a contribution margin approach should be used rather than a traditional income statement approach. True False

true

If the company is a​ price-setter for a product or​ service, most often management should use the​ _______ method when setting the standard price for the product or service. A. ​Cost-Plus Pricing B. Target Cost Pricing C. Target Pricing D. ​Profit-Plus Pricing

​Cost-Plus Pricing