Chapter 11 Pearson Test

pdf

School

George Brown College Canada *

*We aren’t endorsed by this school

Course

ACCT3009

Subject

Management

Date

Apr 3, 2024

Type

pdf

Pages

Uploaded by CaptainIceGorilla17

CHAPTER 11 PEARSON QUIZ 1. Ben Tool Company is a tool manufacturer. Production capacity is 3,000 units per month; however, they are considering alternative ways to increase capacity to 3,500 units. One of the alternatives involves purchasing new equipment. In this alternative, there are two choices: machine A will provide increased capacity of 4,000 units per month, with unit costs of $14 at capacity, and machine B will increase capacity to 3,600 units per month with unit costs of $15 at capacity. Both machines are adequate since Ben's does not intend to go beyond the 3,500 units per month level for the foreseeable future. Relevant information for this decision includes __________. A. whether other costs will change solely due to a capacity increase B. excess capacity of either machine C. Ben's planned capacity utilization D. the different unit cost of production between the two machines at their capacity levels E. the different unit cost of production between the two machines at Ben's planned capacity levels 2. Toronto's Kitchens is approached by Ms. Tammy Wang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The accompanying per unit data apply for sales to regular customers. Toronto's Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit. For Toronto's Kitchens, what is the minimum acceptable price of this one-time-only special order? A. $900 B. $800 C. $850 D. $1,440 E. $930 1

3. Silver Engine Company manufactures part Z92 used in several of its engine models. Monthly production costs for 1,000 units are as shown. Silver Engine Company has the option of purchasing the part from an outside supplier at $61 per unit. It is estimated that all of the fixed overhead costs assigned to Z92 will remain if the company purchases Z92 from the outside supplier. What is the maximum price that Silver Engine Company should be willing to pay the outside supplier? A. $61 per Z92 part B. $38 per Z92 part C. $64 per Z92 part D. $59 per Z92 part E. $43 per Z92 part 4. The Good Gameshop manufactures specialized board games. Management is attempting to search for ways to reduce costs and is considering two alternatives for an upcoming project of special games that must be delivered to the customer in 12 months' time. Management agreed to the special project job as they have an idle plant that is scheduled for demolition 18 months from now, and either alternative will easily meet the delivery deadline. Alternative 1 requires 10 machine operators and 2.5 individuals to handle direct materials. Employee pay averages $17.50 per hour and will increase to $18.50 at the mid-point (July 1) of next year. Each employee currently works 2,500 hours but will decrease to 2,400 hours if Alternative 2 is implemented. The second proposal only requires 8.5 workers. Which of the following items of information are relevant to this decision? A. the timing of the wage increase B. hourly wage rates C. the delivery deadline D. the number of employees required in each alternative E. property taxes for the idle plant 5. Which of the following would not be considered in a make or buy decision? A. potential rental income from space occupied by production area B. variable costs of production C. qualitative factors D. unchanged fixed costs E. potential usage of manufacturing capacity 2

6. Laura Industries is considering replacing a machine that is presently used in its production process. The accompanying information is available. Which of the information provided in the table is irrelevant to the replacement decision? A. the original cost of the old machine B. the current disposal value of the old machine C. the remaining useful life of the old machine D. the future disposal value of the replacement machine E. the annual operating cost of the old machine 7. A company has two manufacturing facilities: one in Alberta that produces a bulk chemical that it sells to many different retailers and one in Ontario that is dedicated to producing a specialty chemical for one client only. The annual profit from the single client is $150,000, and the profit from the other facility's sales is $1,500,000 after allocating combined fixed costs based on units produced. Another company has offered to lease the Ontario facilities for $260,000. Which of the following is TRUE? A. The $260,000 is an opportunity cost of continuing to use the Ontario plant. B. Incremental costs exceed incremental revenues if the plant is rented. C. Incremental revenues exceed total costs if the plant is rented. D. The company incurred a $260,000 opportunity cost for the past years, but this was not recorded on its books. E. The company needs to determine the contribution margin for each product before making any decisions. 3

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

8. Koch Brothers purchased a new production machine for $200,000. It is capable of producing 400,000 units over its useful life, thus the manufacturer's salesperson claimed the unit cost would only be $0.50. Koch's own engineers recommended that the company acquire a machine that would have a unit cost of production of no more than $0.48 (with a $0.03 variance). A competitor of the vendor, who also was trying to sell Koch some equipment, claimed that the $0.50 is understated by $0.04 per unit. The total anticipated demand over the asset's useful life is 300,000 units. Relevant information includes ___________. A. the fact that the $0.50 falls below the $0.48 + $0.03 variance B. being able to produce at excess capacity C. the $0.50 unit cost D. the unit cost at Koch's planned capacity utilization E. the different unit costs of production between the two vendors' machines 9. Rainbow Company has a current production level of 20,000 units per month. Unit costs at this level are as shown. Current monthly sales are 18,000 units. Jim Company has contacted Rainbow Company about purchasing 1,500 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Rainbow Company's change in operating profits if the special order is accepted? A. $1,500 increase in operating profits B. $1,650 increase in operating profits C. $400 decrease in operating profits D. $400 increase in operating profits E. $1,800 decrease in operating profits 10. The variation in total costs between two alternatives is known as __________. A. predictable cost B. differential cost C. analyzed cost D. expected cost E. irrelevant cost 4

11. Comics Plus has a current production level of 200,000 comics per month. Unit costs at this level are as shown. Current monthly sales are 180,000 units. Printers Ltd. has contacted Comics Plus about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order, and variable marketing/distributing costs would not be incurred on the special order. What is Comics Plus' change in profits if the order is accepted? A. $7,500 increase B. $6,000 decrease C. $8,500 increase D. $6,000 increase E. $3,000 increase 12. Which of the following is TRUE concerning opportunity costs? A. They are relevant for the make/buy decision. B. They require accounting journal entries. C. They entail cash disbursements. D. They are incorporated into formal financial accounting reports. E. They entail cash receipts. 13. Past costs that are unavoidable and unchangeable are known as _____. A. operating costs B. sunk costs C. product production costs D. constraining costs E. fixed overhead costs 5

14. Toronto's Kitchens is approached by Ms. Tammy Wang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The accompanying per unit data apply for sales to regular customers. Toronto's Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit. Other than price, what other item should Toronto's Kitchens consider before accepting this one-time-only special order? A. price is the only consideration B. management stock options C. reaction of existing customers to the lower price offered to Ms. Wang D. demand for cherry cabinets E. reaction of shareholders 15. John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again. His wife Sherry suggested that he buy a 5-year-old used Jeep Grand Cherokee instead for $6,000 cash. Sherry estimated the following costs for the two cars. What should John do? What are his savings in the first year? A. Buy the Grand Cherokee; $280 B. Buy the Grand Cherokee; $8,100 C. Buy the Grand Cherokee; $180 D. Fix the Trail Blazer; $6,280 E. Fix the Trail Blazer; $3,180 6

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

16. Silver Engine Company manufactures part Z92 used in several of its engine models. Monthly production costs for 1,000 units are as shown. Silver Engine Company has the option of purchasing the part from an outside supplier at $61 per unit. It is estimated that all of the fixed overhead costs assigned to Z92 will remain if the company purchases Z92 from the outside supplier. If Silver Engine Company purchases 1,000 Z92 parts from the outside supplier per month, then its monthly operating income will ___________. A. decrease by $23,000 B. decrease by $40,000 C. increase by $3,000 D. decrease by $46,000 E. decrease by $2,000 17. Golden Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as shown. It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Golden Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. If Golden Engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly operating income will ___________. A. decrease by $5,000 B. decrease by $35,000 C. increase by $7,000 D. increase by $15,000 E. increase by $13,000 7

18. Omar Corporation currently manufactures a subassembly for its main product. The variable costs per unit are $48 in addition to a $6 charge based on estimated selling expenses. R-Corp has contacted Omar with an offer to sell them 5,000 of the subassemblies for $44.00 each. Omar will eliminate $60,000 of fixed overhead if it accepts the proposal. What is the increase or decrease in profit from accepting the offer? A. $50,000 decrease B. $70,000 increase C. $170,000 increase D. $110,000 increase E. $50,000 increase 19. Audio Labs collected the following information on the cost of producing 20,000 speaker units: Cartunes has offered to sell Audio 10,000 speakers for $56.00 each. Should Audio Labs make or buy the parts if the facilities remain idle when speakers are purchased? A. buy, save $4.00 per unit B. make, save $6.00 per unit C. make, save $4.00 per unit D. buy, save $16.00 per unit E. make, save $2.00 per unit 20. A product cost is composed of the following. The product sells for $40 and a 15% commission is paid to a salesperson for every unit sold. Management accountants also estimate that storage cost per unit averages $0.75 per unit. What is the full cost of the product? A. $14.00 B. $22.00 C. $28.00 D. $28.75 8

21. Walace Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Walace Manufacturing has excess capacity. The accompanying per unit data apply for sales to regular customers. What is the change in operating profits if the one-time-only special order for 1,000 units is accepted for $180 a unit by Walace? A. $40,000 increase in operating profits B. $75,000 decrease in operating profits C. $10,000 decrease in operating profits D. $10,000 increase in operating profits E. $50,000 increase in operating profits 22. Golden Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as shown. It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Golden Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. If Golden Engine Company accepts the offer from the outside supplier, what is the monthly avoidable costs (costs that will no longer be incurred)? A. $92,000 B. $100,000 C. $98,000 D. $50,000 E. $80,000 9

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

23. Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75-cent price increase, demand is expected to fall by 7,000 units. A. No, because demand decreased. B. No, because the selling price increases. C. Yes, because operating profits increase. D. Yes, because contribution margin per unit increases. 24. Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75-cent price increase, demand is expected to fall by 7,000 units. If the price increase is implemented, operating profit is projected to ________. A. increase by $35,100 B. decrease by $7,000 C. increase by $5,250 D. decrease by $5,250 25. When considering a project that will require production using otherwise idle resources, which of the following are TRUE? A. Only the variable costs of the project are relevant. B. Avoidable fixed costs are irrelevant. C. In the short run, even if revenue is less than the total costs of production, the project could help the company's overall operating income. D. Only financial factors should be considered. E. The project should not be undertaken if total revenue from the project is less than the total costs of production. 10

26. Golden Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as shown. It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Golden Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. What is the maximum price that Golden Engine Company should be willing to pay the outside supplier? Round to the nearest dollar. A. $92 per TE456 part B. $100 per TE456 part C. $98 per TE456 part D. $50 per TE456 part E. $80 per TE456 part 27. Sunk costs ________. A. are relevant B. are differential C. are evaluated to determine if they are relevant or not evaluating alternatives D. have future implications E. are irrelevant and ignored when evaluating alternatives 28. Which of the following should management consider to avoid the pitfalls of relevant-cost analysis? A. Historic revenues and costs for items that differ according to alternatives should be considered. B. Assume that all variable costs are relevant. C. Assume that all fixed costs are irrelevant. D. Consider all current revenues and costs. E. Include any item of revenue or cost that is either an expected future revenue or expected future cost, and, differs between the alternatives. 11

29. John's 5-year-old Geo Prizm requires repairs estimated at $2,900 to make it road worthy again. His friend Julie suggested that he buy a 5-year-old used Honda Civic instead for $3,000 cash. Julie estimated the following costs for the two cars. The cost NOT relevant for this decision is the ________. A. annual operating costs of the Geo Prizm B. acquisition cost of the Geo Prizm C. annual operating costs of the Honda Civic D. repairs to the Geo Prizm E. acquisition cost of the Honda Civic 30. Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The accompanying per unit data apply for sales to regular customers. What is the full cost of the product per unit? A. $690 B. $1,035 C. $430 D. $345 12

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

31. Northern Glass Manufacturing has a current production level of 200,000 glass jars per month. Unit costs at this level are as shown. Current monthly sales are 180,000 units. Canadian Hardware Ltd. has contacted Northern Glass Manufacturing about purchasing 15,000 units at $1.00 each. Current sales would not be affected by the special order, and variable marketing/distributing costs would not be incurred on the special order. What is Northern Glass Manufacturing's change in profits if the order is accepted? A. $1,800 decrease B. $300 decrease C. $4,800 decrease D. $4,800 increase E. $2,700 increase 32. Central Medical Supply Inc., a manufacturer of medical testing equipment, has $240,000 worth of an obsolete line of testing equipment. The obsolete equipment can be adapted to fit another line of testing equipment at a cost of $65,000; the market value would then be $146,000. However, Tripac offered to purchase the obsolete equipment as is for $88,000. What are the relevant figures above for management in their decision? A. ($136,000- $65,000); ($88,000- 240,000) B. ($146,000-$65,000); ($88,000- 0) C. ($240,000+$65,000); ($88,000+ 240,000) D. ($240,000+ $65,000); ($88,000- 0) E. ($240,000+ $65,000); ($88,000 - 240,000) 33. Which of the following represents a qualitative factor? A. the timing of variable costs B. any nonfinancial factor C. historical costs D. an outcome that cannot be measured in numerical terms E. relevant costs 13

34. Central Medical Supply Inc., a manufacturer of medical testing equipment, has $240,000 worth of an obsolete line of testing equipment. The obsolete equipment can be adapted to fit another line of testing equipment at a cost of $65,000; the market value would then be $146,000. However, Tripac offered to purchase the obsolete equipment as is for $88,000. What is the opportunity cost associated with the adaptation of the equipment to another line of testing equipment, assuming Central accepts Tripac's offer? A. $81,000 B. $88,000 C. $63,000 D. $240,000 E. none of the above 35. Northwoods manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $90 per table, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Northwoods' policy to add a 50% markup to full costs. Northwoods is invited to bid on a one-time-only special order to supply 110 rustic tables. What is the lowest price Northwoods should bid on this special order? A. $7,920 B. $6,300 C. $10,800 D. $13,500 E. $9,000 36. John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again. His wife Sherry suggested that he buy a 5-year-old used Jeep Grand Cherokee instead for $6,000 cash. Sherry estimated the following costs for the two cars. The cost NOT relevant for this decision is the ________. A. annual operating costs of the Grand Cherokee B. repairs to the Trail Blazer C. acquisition cost of the Grand Cherokee D. acquisition cost of the Trail Blazer E. annual operating costs of the Trail Blazer 14

37. First Choice has a plant capacity of 80,000 units per month. Unit costs at capacity are as shown. Current monthly sales are 78,000 units at $12.60 each. Computer Output Management has contacted First Image about purchasing 2,000 units at $12.00 each. Current sales would not be affected by the special order. What is First Image's change in profits if the order is accepted? A. $2,600 decrease B. $8,600 increase C. $4,400 increase D. $3,400 increase E. $3,600 decrease 36. The last step in the decision process is normally to _______. A. make assumptions and predictions B. perform quantitative analysis C. choose alternatives D. gather information E. evaluate and explain outcomes 37. When making decisions, it is best to use _______. A. fixed costs that would be incurred B. variable costs that would be incurred C. average costs D. relevant costs E. unit cost, rather than total cost 15

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

38. Walace Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Walace Manufacturing has excess capacity. The accompanying per unit data apply for sales to regular customers. What is the full cost of the product per unit? A. $190 B. $140 C. $255 D. $95 E. $110 39. Walace Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Walace Manufacturing has excess capacity. The accompanying per unit data apply for sales to regular customers. What is the contribution margin per unit? A. $85 B. $155 C. $160 D. $195 E. $110 16

40. John's 5-year-old Geo Prizm requires repairs estimated at $2,900 to make it road worthy again. His friend Julie suggested that he buy a 5-year-old used Honda Civic instead for $3,000 cash. Julie estimated the following costs for the two cars. What should John do? What are his savings in the first year? A. Fix the Geo Prizm; $2,820 B. Buy the Honda Civic; $180 C. Fix the Geo Prizm; $5,280 D. Buy the Honda Civic; $80 E. Buy the Honda Civic; $15,080 41. Unit cost data can mislead decisions by including irrelevant costs or by _______. A. not computing unit costs at the relevant output level B. computing administrative costs C. including qualitative data D. not computing fixed overhead costs E. computing labour and materials costs only 42. Snapper Tool Company has a production capacity of 3,000 units per month, but current production is only 2,500 units. Total manufacturing costs are $60 per unit and marketing costs are $16 per unit. Doug Levy offers to purchase 500 units at $76 each for the next five months. Should Snapper accept the one-time-only special order if only absorption-costing data are available? A. No, since only the employees will benefit. B. Yes, since operating profits will most likely increase. C. Yes, good customer relations are essential. D. No, the company will only break even. E. Yes, because breaking even is better than having idle capacity. 17

43. Walace Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Walace Manufacturing has excess capacity. The accompanying per unit data apply for sales to regular customers. For Walace Manufacturing, what is the minimum acceptable price of this special order? A. $140 B. $170 C. $130 D. $255 E. $240 44. Companies periodically confront decisions about discontinuing or adding branches or business segments. In order to determine the best course of action, a ________ should be performed in order to make the optimal decision. A. relevant-risks and relevant-loss analysis B. relevant capital and relevant cash flow analysis C. relevant feasibility study D. relevant risk assessment E. relevant-revenue and relevant-cost analysis 45. The feedback obtained in the decision process cannot affect _______. A. the prediction method B. implementation C. future predictions D. the decision model E. past performance 18

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

46. For make-or-buy decisions, relevant costs include _______. A. incremental costs plus opportunity costs B. variable costs plus fixed overhead C. direct material costs plus direct labour costs D. differential costs plus sunk costs E. incremental costs plus fixed costs 47. If Henry Inc. doesn't use one of its limited resources in the best possible way, the lost contribution to income could be called ________. A. a constraining factor B. an alternative cost C. a resource cost D. an opportunity cost E. a total alternative cost 48. Which of the following costs are never relevant in the decision-making process? A. relevant costs B. fixed costs C. opportunity costs D. historical costs E. variable costs 49. Which of the following anticipated future costs always differ among alternative courses of actions? A. relevant costs B. indirect costs C. historical costs D. direct materials costs E. direct labour costs 19

50. Silver Engine Company manufactures part Z92 used in several of its engine models. Monthly production costs for 1,000 units are as shown. Silver Engine Company has the option of purchasing the part from an outside supplier at $61 pe unit. It is estimated that all of the fixed overhead costs assigned to Z92 will remain if the company purchases Z92 from the outside supplier. If Silver Engine Company accepts the offer from the outside supplier, what are the total monthly avoidable costs (costs that will no longer be incurred)? A. $21,000 B. $59,000 C. $15,000 D. $38,000 E. $64,000 20

Chapter 11 Pearson Test

Related Documents