Accounting 213 Exam 4

a product whose revenues to not cover its variable costs and its traceable fixed costs should usually be dropped

true

when a company has a production restraint, total contribution margin will be maximized by emphasizing the products with the highest contribution margin per unit of the constrained resourcde

true

when are companies forced to make volume trade off decisions

when they do not have enough capacity to product all of the products and sales volumes demanded by the customers

Should an avoidable fixed production cost incurred after the split off point be considered

yes

Should selling price of the further processed unit be considered in a sell or process further decision

yes

should a variable production costs incurred after the split off point be considered

yes

should selling price of the unit at the split off point be considered

yes

should the separable cost of further producing the unit be considered

yes

future costs that do not differ between alternatives are ireelevant in a decision

True

when a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the highest contribution margin per unit of the constrained resource

True

the contribution margin generated by an alternative use of the production equipment should NOT be considered when evaluating a make or buy decision

false

the contribution margin generated by an alternative use of the production equipment should not be considered when evaluating make or buy decision

false

variable costs are always relevant costs in decisions

false

Jacob corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is jacobs constrained resource. Jacob would make the most profit if it produces the product that

generates the highest contribution margin per stamping machine hour

all joint costs, which include all costs incurred up to the splitoff point should be....

ignored

discontinuting unprofitable products would...

increase profitability if the resources no longer required by the discontinued product can be eliminated. If the fixed costs currently allocated to the product line can be allocated to other product lines, net income will decrease by the amount of the contribution margin of the product line being discontinued.

After the split off point....

incremental cash inflow must exceed incremental cash outflows

What term is used to describe an increase in cost between alternatives

incremental cost (relevant cost)

the opportunity cost of making a component part in a factory with no excess capacity is the

net benefit forgone from the best alternative use of the capacity required

should a variable production cost before the split off point be considered

no

should the amount of joint product costs allocated be considered

no

should the joint processing cost at the split off point be considered

no

A joint product is

one of several products produced from a common input

it is profitable to continue processing joint products after the split off point if the total revenues exceed the joint costs

false

The cost of an old machine is always considered an opportunity cost in a decision

False

In a sell or process further decision, consider the following costs 1. a variable production cost incurred prior to split off 2. a variable production cost incurred after split off 3. an avoidable fixed production cost incurred after split off Which of the following costs are not relevant in decision making

1. variable production cost incurred prior to split off

relevant costs in a make or buy decision of a part include setup overhead costs to manufacture the product using the outsourced part

false

relevant costs in a make vs buy decision of a part include setup overhead costs for the manufacture of the product using the outsourced part

false

should a fixed production costs incurred BEFORE the split off point be considered

No

A cost that can be avoided by choosing one alternative over another is relevant for decision purposes.

True

A product whose revenues do not cover its variable costs and its traceable fixed costs should usually be dropped

True

Assuming there is sufficient demand..

a company should produce more products with the highest contribution margin per unit of the constrained resource to maximize profits, rather than focusing on the highest total contribution margin per unit when there is a constraint

What term is used to describe a cost that can be eliminated by choosing one alternative over another

avoidable cost

if a segment is dropped, what costs cannot be avoided

common fixed costs

United industries manufactures a number of products at its highly automated factor. The products are very popular, with demand far exceeding the factorys capacity. To maximize profit, management should rank products based on their

contribution margin per unit of the constrained resource

A fixed production cost incureed before the split off point in a joint process is relevant in a sell or process further decision

false

All fixed costs are sunk costs

false

In a decision to drop a product, the product should be charged for rent in proportion to the space it occupies even if the space has no alternative use and the rental payment is unavoidable

false

It is profitable to continue processing a joint product after the split-off point if the total revenues exceed the joint costs

false

Opportunity costs represent costs than can be reduced by effective management of operations

false

a fixed production cost incurred befoer the split off point in a joint process is relevant

false

in a decision to drop a product, the product should be charged for rent in proportion to the space it occupies even if the space has no alternative use and the rental payment is unavoidable

false

in a special order situation that involved using capacity that is not idle, opportunity costs are zero

false

in a special order situation that involves using capacity that is not idle, opportunity costs are zero

false

in a special order situation, any fixed cost associated with the order would be irrelevant

false

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds

the incremental costs associated with the order

The variable costs of a product are relevant in a decision concerning whether or not to eliminate the product

true