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