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
