Relevant Costing

Question 1

1. For decision making, a listing of the relevant costs:A) will help the decision maker concentrate on the pertinent dataB) will only include future costsC) will only include costs that differ among alternativesD) All of these answers are correct.

Answer 1

All of these answers are correct.

Question 2

2) Sunk costs:A) are historical costsB) cannot be changedC) are never relevantD) all of the above

Answer 2

all of the above

Question 3

3. Sunk costs:A) are relevantB) are differentialC) have future implicationsD) are ignored when evaluating alternatives

Answer 3

are ignored when evaluating alternatives

Question 4

4. A car purchased last year is an example of a(n):A) sunk costB) relevant costC) differential costD) avoidable cost

Answer 4

sunk cost

Question 5

5. Costs that CANNOT be changed by any decision made now or in the future are:A) fixed costsB) indirect costsC) avoidable costsD) sunk costs

Answer 5

sunk costs

Question 6

6. In evaluating different alternatives, it is useful to concentrate on:A) variable costsB) fixed costsC) total costsD) relevant costs

Answer 6

relevant costs

Question 7

7. Which of the following costs always differ among future alternatives?A) fixed costsB) historical costsC) relevant costsD) variable costs

Answer 7

relevant costs

Question 8

8. Which of the following costs are NEVER relevant in the decision-making process?A) fixed costsB) historical costsC) relevant costsD) variable costs

Answer 8

historical costs

Question 9

9) The cost NOT relevant for this decision is the:A) acquisition cost of the Trail BlazerB) acquisition cost of the Grand CherokeeC) repairs to the Trail BlazerD) annual operating costs of the Grand Cherokee

Answer 9

annual operating costs of the Grand Cherokee

Question 10

11. A relevant revenue is a revenue that is a(n):A) past revenueB) future revenueC) in-hand revenueD) earned revenue

Answer 10

future revenue

Question 11

12) A relevant cost is a cost that is a (n):A) future costB) past costC) sunk costD) non-cash expense

Answer 11

future cost

Question 12

13) Relevant information has all of these characteristics EXCEPT:A) past costs are irrelevantB) all future revenues and expenses are relevant - Fixed CostC) different alternatives can be compared by examining differences in total revenue and expensesD) qualitative factors should be considered

Answer 12

all future revenues and expenses are relevant - Fixed Cost

Question 13

14) Quantitative factors:A) include financial information, but not nonfinancial informationB) can be expressed in monetary termsC) are always relevant when making decisionsD) include employee morale

Answer 13

can be expressed in monetary terms

Question 14

15) Qualitative factors:A) generally are easily measured in quantitative termsB) are generally irrelevant for decision makingC) may include either financial or nonfinancial informationD) include customer satisfaction

Answer 14

include customer satisfaction

Question 15

16) Historical costs are helpful:A) for making future predictionsB) for decision makingC) because they are quantitativeD) None of these answers is correct.

Answer 15

for making future predictions

Question 16

17) When making decisions:A) quantitative factors are the most importantB) qualitative factors are the most importantC) appropriate weight must be given to both quantitative and qualitative factorsD) both quantitative and qualitative factors are unimportant

Answer 16

appropriate weight must be given to both quantitative and qualitative factors

Question 17

18) Employee morale at Dos Santos, Inc., is very high. This type of information is known as a:A) qualitative factorB) quantitative factorC) nonmeasurable factorD) financial factor

Answer 17

qualitative factor

Question 18

19) Roberto owns a small body shop. His major costs include labor, parts, and rent. In the decision making process, these costs are considered to be:A) fixedB) qualitative factorsC) quantitative factorsD) variable

Answer 18

quantitative factors

Question 19

20) One-time-only special orders should only be accepted if:A) incremental revenues exceed incremental costsB) differential revenues exceed variable costsC) incremental revenues exceed fixed costsD) total revenues exceed total costs

Answer 19

incremental revenues exceed incremental costs

Question 20

21) When deciding to accept a one-time-only special order from a wholesaler, management should do all of the following EXCEPT:A) analyze product costsB) consider the special order’s impact on future prices of their productsC) determine whether excess capacity is availableD) verify past design costs for the product

Answer 20

verify past design costs for the product

Question 21

22) When there is excess capacity, it makes sense to accept a one-time-only special order for less than the current selling price when:A) incremental revenues exceed incremental costsB) additional fixed costs must be incurred to accommodate the orderC) the company placing the order is in the same market segment as your current customersD) it never makes sense

Answer 21

incremental revenues exceed incremental costs

Question 22

23) Full cost of the product is:A) the sum of fixed costs in all the business functions of the value chainB) the sum of variable costs in all the business functions of the value chainC) the sum of all variable and fixed costs in all the business functions of the value chainD) the sum of all costs in the value chain minus marketing costs

Answer 22

the sum of all variable and fixed costs in all the business functions of the value chain

Question 23

37) The sum of all the costs incurred in a particular business function (for example, marketing) is called the:A) business function costB) full product costC) gross product costD) multiproduct cost1

Answer 23

business function cost

Question 24

38) The sum of all costs incurred in all business functions in the value chain (product design, manufacturing, marketing, and customer service, for example) is known as the:A) business costB) full product costC) gross product costD) multiproduct cost

Answer 24

full product cost

Question 25

39) An example of a qualitative factor for the decision-making process is:A) customer satisfactionB) units soldC) material costD) labor hours incurred

Answer 25

customer satisfaction

Question 26

40) Outsourcing is:A) purchasing goods and services internallyB) never a viable optionC) more desirable than insourcingD) purchasing goods and services from outside vendors

Answer 26

purchasing goods and services from outside vendors

Question 27

41) Insourcing is:A) purchasing goods and services internallyB) purchasing goods and services from outside vendorsC) more expensive than outsourcingD) less expensive than outsourcing

Answer 27

purchasing goods and services internally

Question 28

42) Problems that should be avoided when identifying relevant costs include all of the following EXCEPT:A) assuming all variable costs are relevantB) assuming all fixed costs are irrelevantC) using unit costs that do not separate variable and fixed componentsD) using total costs that separate variable and fixed components

Answer 28

using total costs that separate variable and fixed components

Question 29

43) The best way to avoid misidentification of relevant costs is to focus on:A) expected future costs that differ among the alternativesB) historical costsC) unit fixed costs

Answer 29

expected future costs that differ among the alternatives

Question 30

44) Factors used to decide whether to outsource a part include:A) the supplier's cost of direct materialsB) if the supplier is reliableC) the original cost of equipment currently used for production of that partD) past design costs used to develop the current composition of the part

Answer 30

if the supplier is reliable

Question 31

45) Relevant costs of a make-or-buy decision include all of the following EXCEPT:A) fixed salaries that will not be incurred if the part is outsourcedB) current direct material costs of the partC) special machinery for the part that has no resale valueD) material-handling costs that can be eliminated

Answer 31

special machinery for the part that has no resale value

Question 32

46) Which of following are risks of outsourcing the production of a part?A) unpredictable qualityB) unreliable deliveryC) unscheduled price increasesD) All of2 these answers are correct.

Answer 32

All of these answers are correct.

Question 33

47) Which of the following minimize the risks of outsourcing?A) the use of short-term contracts that specify priceB) the responsibility for on-time delivery is now the responsibility of the supplierC) building close relationships with the supplierD) All of these answers are correct.

Answer 33

building close relationships with the supplier

Question 34

49) When evaluating a make-or-buy decision, which of the following does NOT need to be considered?A) alternative uses of the production capacityB) the original cost of the production equipmentC) the quality of the supplier's productD) the reliability of the supplier's delivery schedule

Answer 34

the original cost of the production equipment

Question 35

50) For make-or-buy decisions, a supplier's ability to deliver the item on a timely basis is considered a(n):A) qualitative factorB) relevant costC) differential factor

Answer 35

qualitative factor

Question 36

51) The incremental costs of producing one more unit of product include all of the following EXCEPT:A) direct materialsB) direct laborC) variable overhead costsD) fixed overhead costs

Answer 36

fixed overhead costs

Question 37

53) Unit cost data can most mislead decisions by:A) not computing fixed overhead costsB) computing labor and materials costs onlyC) computing administrative costsD) not computing unit costs at the same output level

Answer 37

not computing unit costs at the same output level

Question 38

54) Schmidt Sewing Company incorporates the services of Deb's Sewing. Schmidt purchases pre-cut dresses from Deb's. This is primarily known as:A) insourcingB) outsourcingC) relevant costingD) sunk costing

Answer 38

outsourcing

Question 39

55) Smiley Face Company manufactures signs from direct materials to the finished product. This is considered:A) insourcingB) outsourcingC) relevant costingD) sunk costing

Answer 39

insourcing

Question 40

56) Which of the following would NOT be considered in a make-or-buy decision?A) fixed costs that will no longer be incurredB) variable costs of productionC) potential rental income from space occupied by the production areaD) unchanged supervisory costs

Answer 40

unchanged supervisory costs

Question 41

60. Relevant costs in a make-or-buy decision of a part include:A) setup overhead for the manufacture of the product using the outsourced partB) currently used manufacturing capacity that has alternative usesC) annual plant insurance costs that will remain the sameD) corporate office costs that will be allocated differently

Answer 41

currently used manufacturing capacity that has alternative uses

Question 42

1. The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is termed: a. manufacturing marginb. contribution marginc. differential costd. differential revenue

Answer 42

differential revenue

Question 43

2. The amount of increase or decrease in cost that is expected from a particular course of action as compared with an alternative is termed:a. period costb. product costc. differential costd. discretionary cost

Answer 43

differential cost

Question 44

A cost that will not be affected by later decisions is termed a(n):a. historical costb. differential costc. sunk costd. replacement cost

Answer 44

sunk cost

Question 45

The amount of income that would result from an alternative use of cash is called:a. differential incomeb. sunk costc. differential revenued. opportunity cost

Answer 45

opportunity cost

Question 46

Relevant revenues and costs focus on:a. activities that occurred in the pastb. monies already earned and/or spentc. last year's net incomed. differences between the alternatives being considered

Answer 46

differences between the alternatives being considered

Question 47

Franklin and Johnson, CPAs, currently work a five-day week. They estimate that net income for the firm would increase by $45,000 annually if they worked an additional day each month. The cost associated with the decision to continue the practice of a five-day work week is an example of:a) differential revenueb) sunk costc) differential incomed) opportunity cost

Answer 47

opportunity cost

Question 48

Dary Co. Produces a single product. It's normal selling price is $28 per unit. The variable costs are $18 per unit. Fixed costs are $20,000 for a normal production run of 5,000 units per month. Dary received a request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of $17.50 per unit. Dary Co. has the capacity to handle the special order, and for this order a variable selling cost of $2 per unit would be eliminated. Should the special order be accepted?a. Cannot determine from the data givenb. Yesc. Nod. There would be no difference in accepting or rejecting the special order

Answer 48

No

Question 49

A practical approach which is frequently used by managers when setting normal long-run prices is the:a. cost-plus approachb. economic theory approachc. price graph approachd. market price approach

Answer 49

cost-plus approach

Question 50

Which of the following is NOT a cost concept commonly used in applying the cost-plus approach to product pricing?a. Product cost conceptb. Total cost conceptc. Variable cost conceptd. Fixed cost concept

Answer 50

Fixed cost concept

Question 51

7. In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup?a. Total selling and administrative expenses plus desired profitb. Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profitc. Total costs plus desired profitd. Desired profit

Answer 51

Desired profit

Question 52

8. In using the product cost concept of applying the cost-plus approach to product pricing, what is included in the markup?a. Desired profitb. Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profitc. Total costs plus desired profitd. Total selling and administrative expenses plus desired profit

Answer 52

Total selling and administrative expenses plus desired profit

Question 53

9. In using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the markup?a. Total costs plus desired profitb. Desired profitc. Total selling and administrative expenses plus desired profitd. Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit

Answer 53

Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit

Question 54

10. What cost concept used in applying the cost-plus approach to product pricing covers selling expenses, administrative expenses, and desired profit in the "markup"?a. Total cost conceptb. Product cost conceptc. Variable cost conceptd. Sunk cost concept

Answer 54

Product cost concept

Question 55

11. What cost concept used in applying the cost-plus approach to product pricing includes only desired profit in the "markup"?a. Product cost conceptb. Variable cost conceptc. Sunk cost conceptd. Total cost concept

Answer 55

Total cost concept

Question 56

12. What cost concept used in applying the cost-plus approach to product pricing includes only total manufacturing costs in the "cost" amount to which the markup is added?a. Variable cost conceptb. Total cost conceptc. Product cost concept

Answer 56

Product cost concept

Question 57

13. Managers who often make special pricing decisions are more likely to use which of the following cost concepts in their work?a. Total costb. Product costc. Variable costd. Fixed cost

Answer 57

Variable cost

Question 58

14. Defense contractors would be more likely to use which of the following cost concepts in pricing their product?a. Variable costb. Product costc. Total costd. Fixed cost

Answer 58

Total cost

Question 59

15. In contrast to the total product and variable cost concepts used in setting seller's prices, the target cost approach assumes that:a. a markup is added to total costb. selling price is set by the marketplacec. a markup is added to variable costd. a markup is added to product cost

Answer 59

selling price is set by the marketplace