Online Tutorial Quiz

Please answer all questions

1		The only information relevant to a decision is that which varies among the possible courses of action being considered.
			A)	True
			B)	False
2		If you reduce your work hours, for which you are paid $15 an hour, from 40 to 20 hours per week to attend your accounting class, your opportunity cost of attending course is $300 per week.
			A)	True
			B)	False
3		Opportunity costs, once determined, are entered into the ledger by a journal entry for the amount of the cost.
			A)	True
			B)	False
4		Depreciation expense is an example of a sunk cost.
			A)	True
			B)	False
5		When you decide to trade-in your automobile on a new one, any money you may have spent to recondition the engine prior to trading it in is a sunk cost.
			A)	True
			B)	False
6		Both sunk costs and out-of-pocket costs are relevant to making decisions about the future.
			A)	True
			B)	False
7		When deciding whether to produce special orders by utilizing unused production capacity, fixed costs become relevant to the decision.
			A)	True
			B)	False
8		In general, when capacity is constrained by the limited availability of a particular input (such as machine hours or labor hours), a company should attempt to maximize the sales price per unit generated by that particular input.
			A)	True
			B)	False
9		If you can produce 60 units an hour of Product A on Machine A and 80 units an hour of Product B on Machine A, when making the decision as to which product to allocate to Machine A given its limited capacity in hours, the product with the highest contribution margin per unit should be allocated to Machine A.
			A)	True
			B)	False
10		"Hamburger, a coke, and fries!" he shouted into the fast food intercom. Could these be complementary products?
			A)	True
			B)	False
11		If a hardware store has a contribution margin of 80% on its line of exterior house paints but only a contribution margin of 20% on its line of interior house paints, it should eliminate the interior paints to make room for more exterior house paints to sell.
			A)	True
			B)	False
12		In a make-or-buy decision, the units should always be purchased if it is cheaper to buy the units from an exterior source rather manufacturer them internally.
			A)	True
			B)	False
13		In processing poultry for human consumption, wings, breasts, legs, and thighs are joint products.
			A)	True
			B)	False
14		The point at which a joint product can be further processed or sold independently of the other joint products is called the b.
			A)	True
			B)	False
15		One way to allocate joint costs among the several joint products is on a basis of the relative sales value of each to the total sales value of all the joint products.
			A)	True
			B)	False
16		Which of the following is not a step in the approach to determine the relevant costs needed to make a decision?
			A)	Assemble all of the costs associated with each alternative
			B)	Eliminate sunk costs
			C)	Eliminate costs that differ across alternatives
			D)	Determine the opportunity costs associated with the decision
			E)	Make a decision based on the remaining costs

Consider the following:
Sales price, $2.50 per unit
Manufacturing costs:
Variable costs, $ .30 per unit
Total Fixed costs, $200,000
Current production, 300,000 units
Current capacity, 500,000 units

17		The manufacturer has received a special order for 50,000 units @ $1.00 per unit. The special order will be sold in a foreign market under a different brand name and will not diminish domestic demand for the product. Which of the following is true regarding the special order?
			A)	The special order should be rejected.
			B)	The special order will decrease gross profit by $165,000.
			C)	The special order will increase gross profit by $35,000.
			D)	The special order should be accepted.
			E)	C and D
18		Over the past two months you've spent the following amounts to maintain your automobile: motor overhaul, $2,000, new tires, $400, body repair, $300, and brake work for $500. You've been unable to get any better offer than a $1,500 trade-in toward the purchase of a new car. In making the decision to purchase the new car, which of the following is a factor?
			A)	The $3,200 spent in the past two months is a sunk cost.
			B)	The $1,500 is an opportunity cost.
			C)	You will lose $1,700 ($3,200 - $1,500) on the purchase.
			D)	A, B, and C.
			E)	A and C, only

Unit product costs are:
Direct materials $70
Direct labor 50
Fixed manufacturing overhead 24
Variable manufacturing overhead 15

19		A company has idle capacity. If it can add an extra material to its product, it can sell, on special order, 200 rolls. If the cost for the extra strand is direct material of $2 and direct labor of $6, what should the company do?
			A)	Accept a bid of $120
			B)	Accept a bid of $135
			C)	Accept a bid of $138
			D)	Reject a bid of $143
			E)	None of the above

The Hippo-Hop Toy Company makes three models of wooden rocking horses. The material cost is the same for each model. The difference in the models is primarily due to the amount of labor expended on carving the horse heads from the material.
Unit Unit Direct
Sales Variable Labor
Product Price Cost Hours
Model A $40 $15 1
Model B $60 $24 2
Model C $80 $44 3

20		There is a labor constraint of 1,000 hours per month. Ignoring other considerations, such as demand for any particular model, which of the following is true?
			A)	Model C should be manufactured, exclusively.
			B)	Manufacturing should be divided evenly between models A and C.
			C)	Model A should be manufactured, exclusively.
			D)	Model C will generate total contribution margin of $44,000.
			E)	A and D

Costs to manufacture:
Direct materials $12,000
Direct labor 36,000
Variable overhead 14,000
Fixed overhead 10,000
-------
Total cost of 30,000 units $72,000
=======

21		Each unit can be purchased for $1.50 per unit, which will increase variable overhead costs by $1,000 and reduce fixed overhead costs by $2,000. Which of the following is true?
			A)	The company should continue to make the part.
			B)	All of the costs are relevant costs.
			C)	Only the variable and fixed overhead costs are relevant.
			D)	The company should buy the part.
			E)	B and D

Consider the following:
Product X Product Y
Contribution margin per unit $ 10 $ 21
Contribution margin ratio 40% 60%
Machine hours per unit 3 5

22		The firm has only 12,000 machine-hours available. Should demand for each product exceed the machine-hour capacity of the firm, what should the firm do?
			A)	Produce 1,500 units of Product X and 1,500 units of Product Y.
			B)	Produce 4,000 units of Product X.
			C)	Produce 2,400 units of Product Y.
			D)	Produce 2,000 units of Product X and 1,200 units of Product Y.
			E)	None of the above.

Consider the following:
Product X Product Y
Contribution margin per unit $ 10 $ 12
Contribution margin ratio 40% 60%
Machine-hours per unit 5 8

23		The firm has only 585 machine-hours available. If the demand for each product exceeds the machine-hour capacity of the firm, what should the firm do?
			A)	Produce 45 units of Product X and 45 units of Product Y.
			B)	Produce 117 units of Product X.
			C)	Produce 21 units of Product X and 60 units of Product Y.
			D)	Produce 73 units of Product Y.
			E)	None of the above.

Consider the following:
Product X Product Y Product Z
Sales value at the split-off point $110,000 $140,000 $158,000
Sales value after further processing 155,000 190,000 180,000
Allocated joint costs 70,000 90,000 100,000
Cost of further processing 30,000 40,000 24,000

24		Which of the following statements is true?
			A)	Product X should be sold at the split-off point.
			B)	Product Y should be sold at the split-off point.
			C)	Product X should be sold after further processing.
			D)	Product Z should be sold after further processing.
			E)	None of the above is true.
25		The Pee-Dee Gravel Company produces 4 grades of gravel: Decorative, Basic, Foundation, and Pea. From 10 tons of raw materials, the company produces 5 tons of Decorative, 3 tons of Basic, 1 ton of Foundation, and 1 ton of Pea gravel grades. The cost of raw material is $12.00 per ton. On the basis of the number of tons of each product produced from each 10-ton lot of material, how much of the cost of 90 tons of raw materials should be allocated to the Pea gravel grade?
			A)	$ 90
			B)	$108
			C)	Cannot be determined from the information provided
			D)	An amount greater than in Options A and B
			E)	None of the above
26		The selling price of a Joint Product A is $12,000. Total sales revenue from all of the joint products is $60,000. Total joint cost is $36,000. The gross profit on Joint Product A, based on an allocation of joint costs on relative sales value, is which of the following?
			A)	33.3%
			B)	40.0%
			C)	25.0%
			D)	60.0%
			E)	5.0%