ch 25

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

B. Expected​ future; differ

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

A. Indirect Labor B. Advertising Cost C. Direct Materials D. Direct Labor

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

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. ​Profit-Plus Pricing B. ​Cost-Plus Pricing C. Target Pricing D. Target Cost Pricing

B. ​Cost-Plus Pricing

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 costs of processing the product thus far D. The revenue if the product is sold​ as-is

C. The costs of processing the product thus far

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

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

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

True

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

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

Which of the following are common constraints for a manufacturing​ company?​ (check all that​ apply) A. Machine Hours B. Demand for sales C. Labor Hours D. Direct Materials Available

A. Machine Hours B. Demand for sales C. Labor Hours D. Direct Materials Available

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

A. Sunk costs

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

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

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

A. 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 fixed costs would still exist if it were to drop the product line C. What they would do with the freed manufacturing capacity if the product line was dropped D. If the sports car product line currently provides a positive contribution margin for the company

B. What fixed costs would still exist if it were to drop the product line C. What they would do with the freed manufacturing capacity if the product line was dropped D. If the sports car product line currently provides a positive contribution margin for the company

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

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

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 highest sales price B. Emphasize the product with the lowest fixed costs C. Emphasize the product with the highest contribution margin per unit of the constraint D. Emphasize the product with the lowest variable costs per unit of the constraint

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

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

C. Operating income

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

C. 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 discontinue

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 ratio. C. contribution margin per unit of the constraint. D. profit per unit of product.

C. contribution margin per unit of the constraint.

In deciding whether to drop its electronics product​ line, Smith Company should consider A. the costs it could save by dropping the product line. B. how dropping the electronics product line would affect sales of its other products. 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. Fixed costs of the product or segment can be avoided B. Lost revenues are less than the avoidable fixed costs C. Cost of goods sold exceeds the current sales price D. Lost revenues are less than the total cost savings

D. Lost revenues are less than the total cost savings

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

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

False

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

False

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

False

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

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.

False

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

False

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

False

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

False

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

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

True

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

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

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

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

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

True

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

True