Managerial Accounting Final Exam

Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks.

False

In the payback method, depreciation is deducted from net operating income when computing the annual net cash flow.

False

Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.

False

Joint products are products that are sold to customers as a set or as part of a group of products.

False

One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers.

False

The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers.

False

The term joint cost is used to describe the costs incurred after the split-off point in a process involving joint products.

False

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

False

Defective units should be detected and scrapped or reworked before the bottleneck operation rather than after it.

True

Depreciation expense on existing factory equipment is usually irrelevant in a decision of whether to accept or reject a special offer for a company's product.

True

In a factory operating at capacity, not every machine and person should be working at the maximum possible rate

True

In a sell or process further decision, which of the following costs is relevant? I. A variable production cost incurred after split-off. II. A fixed production cost incurred prior to split-off. A. Only I B. Only II C. Both I and II D. Neither I nor II

A. Only I

Management is considering a one-time-only special order. There is sufficient idle capacity to fill the order without affecting any normal sales. Which one of the following is NOT relevant in making the decision? A. absorption costing unit product costs B. variable costs C. incremental costs D. differential costs

A. absorption costing unit product costs

Two or more products produced from a common input are called: A. common costs. B. joint products. C. joint costs. D. sunk costs.

B. joint products.

37. Which of the following is not an effective way of dealing with a production constraint (i.e., bottleneck)? A. Reduce the number of defective units produced at the bottleneck. B. Pay overtime to workers assigned to the bottleneck. C. Pay overtime to workers assigned to work stations located after the bottleneck in the production process. D. Subcontract work that would otherwise require use of the bottleneck.

C. Pay overtime to workers assigned to work stations located after the bottleneck in the production process.

When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on: A. selling price per unit B. contribution margin per unit C. contribution margin per unit of the constraining resource D. unit sales volume

C. contribution margin per unit of the constraining resource

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost of attending college?

Hal's lost wages at Burger Haven

I. A division's net operating income, after deducting both traceable and allocated common fixed costs, is negative. II. The division's avoidable fixed costs exceed its contribution margin. III. The division's traceable fixed costs plus its allocated common corporate costs exceed its contribution margin. Which of the above statements is a valid reason for eliminating the division?

Only II

In a make-or-buy decision, relevant costs include: A. unavoidable fixed costs B. avoidable fixed costs C. fixed factory overhead costs applied to products D. fixed selling and administrative expenses

avoidable fixed costs

Opportunity costs are:

relevant in decision making.