Managerial Accounting Test 3

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 Why?

In a make-or-buy decision, relevant costs include:

Avoidable fixed costs Why? These are costs associated with particular alternative that will be eliminated if alternative is eliminated A.K.A. Relevant costs or Differential costs Example: Avoiding grad school (Unavoidable costs and Sunk costs are irrelevant costs... these will not be included in decision making)

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. Both I and II B. Only I C. Only II D. Neither I nor II

B. Only I... Why?

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

B. Pay overtime to workers assigned to work stations located after the bottleneck in the production process... IS NOT AN EFFECTIVE WAY OF DEALING WITH PRODUCTION CONSTRAINT Why?

Two or more products produced from a common input are called:

Joint Products

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:

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? A. The cost of the textbooks B. The cost of commuting to the Burger Haven job C. The cost of the cola that Hal will consume during class D. Hal's lost wages at Burger Haven

D. Hal's lost wages at Burger Haven...

Consider the following statements: 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... Why?

Opportunity costs are:

Relevant in decision making

A cost that is traceable to a segment through activity-based costing may or may not be an avoidable cost... (T/F)

True Why?