COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 11, Problem 11.10Q
“Management should always maximize sales of the product with the highest contribution margin per unit.” Do you agree? Why?
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Consider a situation in which a firm needs to make a decision regarding the resources to allocate between two products. One product makes a significantly larger contribution margin than the other. How might the contribution margin affect the decision that the firm makes? What if both contribution margins were positive or both were negative? Are there other factors when considering the contribution margin you should look for? What makes the contribution margin positive or negative?
“We are already measuring total factor productivity. Measuring partial productivities would be of no value.” Do you agree? Comment briefly.
In a manufacturing setting, "the best short-term profit maximization approach is to maximize contribution unit times the number of units sold." Discuss the truthfulness of the statement and show by way of examples how you would set about demonstrating the accuracy of such a statement.
Chapter 11 Solutions
COST ACCOUNTING
Ch. 11 - Prob. 11.1QCh. 11 - Define relevant costs. Why are historical costs...Ch. 11 - All future costs are relevant. Do you agree? Why?Ch. 11 - Distinguish between quantitative and qualitative...Ch. 11 - Describe two potential problems that should be...Ch. 11 - Variable costs are always relevant, and fixed...Ch. 11 - A component part should be purchased whenever the...Ch. 11 - Prob. 11.8QCh. 11 - Managers should always buy inventory in quantities...Ch. 11 - Management should always maximize sales of the...
Ch. 11 - Prob. 11.11QCh. 11 - Cost written off as depreciation on equipment...Ch. 11 - Managers will always choose the alternative that...Ch. 11 - Prob. 11.14QCh. 11 - Prob. 11.15QCh. 11 - Qualitative and quantitative factors. Which of the...Ch. 11 - Special order, opportunity cost. Chade Corp. is...Ch. 11 - Prob. 11.18MCQCh. 11 - Keep or drop a business segment. Lees Corp. is...Ch. 11 - Relevant costs. Ace Cleaning Service is...Ch. 11 - Disposal of assets. Answer the following...Ch. 11 - Relevant and irrelevant costs. Answer the...Ch. 11 - Multiple choice. (CPA) Choose the best answer. 1....Ch. 11 - Special order, activity-based costing. (CMA,...Ch. 11 - Make versus buy, activity-based costing. The...Ch. 11 - Inventory decision, opportunity costs. Best Trim,...Ch. 11 - Relevant costs, contribution margin, product...Ch. 11 - Selection of most profitable product. Body Image,...Ch. 11 - Theory of constraints, throughput margin, relevant...Ch. 11 - Closing and opening stores. Sanchez Corporation...Ch. 11 - Prob. 11.31ECh. 11 - Relevance of equipment costs. Janets Bakery is...Ch. 11 - Equipment upgrade versus replacement. (A. Spero,...Ch. 11 - Special order, short-run pricing. Diamond...Ch. 11 - Short-run pricing, capacity constraints. Fashion...Ch. 11 - International outsourcing. Riverside Clippers Corp...Ch. 11 - Relevant costs, opportunity costs. Gavin Martin,...Ch. 11 - Opportunity costs and relevant costs. Jason Wu...Ch. 11 - Opportunity costs. (H. Schaefer, adapted) The Wild...Ch. 11 - Make or buy, unknown level of volume. (A....Ch. 11 - Make versus buy, activity-based costing,...Ch. 11 - Prob. 11.42PCh. 11 - Product mix, special order. (N. Melumad, adapted)...Ch. 11 - Theory of constraints, throughput margin, and...Ch. 11 - Theory of constraints, contribution margin,...Ch. 11 - Closing down divisions. Ainsley Corporation has...Ch. 11 - Dropping a product line, selling more tours....Ch. 11 - Prob. 11.48PCh. 11 - Dropping a customer, activity-based costing,...Ch. 11 - Equipment replacement decisions and performance...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- What does it mean to obtain a competitive advantage? What role does the cost management system play in helping to achieve this goal?arrow_forward2. CVP analysis allows management to determine the relative profitability of a product by * Keeping fixed costs to an absolute minimum. Highlighting potential bottlenecks in the production process. Assigning costs to a product in a manner that maximizes the contribution margin. Determining the contribution margin O per unit and projected profits at various levels of production.arrow_forwardDefine incremental cost, opportunity cost, and sunk cost. How do these costs impact decision-making? “Variable costs and incremental costs are essentially the same in decision-making.” Do you agree or disagree. “All future costs are relevant costs in decision-making.” Do you agree or disagree. From a decision-making point of view, should joint costs be allocated among joint products? Why or why not? Explain how relating product contribution margins to the amount of the constrained resource they consume help a company maximize its profits?arrow_forward
- Cost control and cost reduction are the two most important tools to maximize profits. Distinguish one from the other. Use examples to further explain your answer.arrow_forward“Increasing the number of indirect-cost pools is guaranteed to sizably increase the accuracy of product or service costs.” Do you agree? Why?arrow_forwardIn order to determine the optimal sales mix for a company, one should evaluate the contribution margin per unit of whatever the scarce resource is True or Faisearrow_forward
- Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. What are the limitations of using operating leverage to predict profitability?arrow_forward“A financial productivity measure contains more information than an operational productivity measure does.” Do you agree and why or why not?arrow_forwardExplain why changes in value-stream profitability may be better information than individual product cost for certain decisions.arrow_forward
- Which of the following objectives would likely be associated with the customer perspective of the balanced scorecard? a. Increasing post-sales service efficiency b. Decreasing product development cycle time c. Reducing distribution channel cost d. Increasing delivery reliabilityarrow_forwardWhat is customer value? How is customer value related to a cost leadership strategy? To a differentiation strategy? To strategic positioning?arrow_forward“All this marginal revenue and marginal cost stuff is just theory. Prices are determined by production costs.” Evaluate this assertion.arrow_forward
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Cost-Volume-Profit (CVP) Analysis and Break-Even Analysis Step-by-Step, by Mike Werner; Author: Accounting Step by Step;https://www.youtube.com/watch?v=D0MOfse9OWk;License: Standard Youtube License