ACCT 245- FINAL
When analyzing two alternatives which is NOT true?
A) Isolating relevant cost gives a different answer than using all costs
B) Isolating relevant costs is classed the differential cost approach
C) Mining irrelevant costs may cause confusion and distract attention from the information that is critical
A) Isolating relevant costs gives a different answer than using all costs
When a company does not have enough capacity to produce all of the products and sales volume demanded by their
customers, this leads to ______.
A) Keep or drop decisions
B) Volume trade-off decisions
C) Sell or process further decisions
D) Make or buy decisions
B) Volume trade-off decisions
Target cost is determined by subtracting the ______ from the anticipated selling price.
A) Manufacturing Overhead
B) Desired Profit
C) After-Sales Service Costs
D) Marketing Costs
B) Desired Profit
The first step in decision making is to:
A) Define the alternative
B) Perform a differential analysis
C) Identify relevant costs and benefits
A) Define the alternative
True or False: When deciding whether to take a train or drive for a weekend trip to visit an out-of-town friend, the
monthly fee a student pays to park at school is not relevant to the decision.
True
Anticipated selling price - Desired profit = ______ ______.
Target Cost
The potential benefit given up when selecting one alternative over another is a(n) ______ cost.
A) Opportunity
B) Avoidable
C) Irrelevant
D) Sunk
True or False: Opportunity costs are not found in accounting records because they are not relevant to decisions.
False
The potential benefit given up when selecting one alternative over another is a(n) ______.
,A) Sunk
B) Irrelevant
C) Opportunity
D Avoidance
C) Opportunity
When making decisions to either buy a movie ticket or rent a DVD, the cost of the movie ticket is a(n) _______ cost.
A) Incremental
B) Irrelevant
C) Avoidable
D) Sunk
A) Incremental
C) Avoidance
Steps in the absorption costing approach are:
A) Multiply unit production costs by 1+ markup percentage
B) determine markup percentage on absorption cost
C) Calculate unit product costs
D) Calculate the price elastically of demand
A) Multiply unit product cost by 1+ markup percentage
B) Determine markup percentage on absorption costing
C) Calculate unit product costs
Reference Value <= Value-Based Price <= EVC
C) Reference Value >= Value-Based >= EVC
D) Reference Value = The price of the best alternatives
C) Reference Value >= Value-Based >= EVC
Reasons to Isolate Relevant Cost
Enough information rarely available to prepare income statements
Prairie, Inc. produces a single product. It has an annual capacity of 10,000 units, but currently uses only 80% of it.
Each unit is sold for $50 and requires direct material worth $30 and direct labor worth $5. Manufacturing overhead
cost is $10 per unit of which 70% is variable. What is Prairie's total incremental cost incurred to produce each unit?
A) $30
B) $42
C) $35
D) $45
B) $42
Decision Making: Concepts
-Keep or Drop Decisions
-Make or Buy Decisions
-Special order Decisions
-Sell or Process Further Decisions
Decision Making: Six Key Concepts
1) Define the alternatives
2) Distinguish between relevant and irrelevant costs and benefits
3) Perform differential analysis
4) Identify sunk costs
, 5) Identify future costs and benefits that do not differ between alternatives
6) Identify opportunity costs
The involvement by a company in more than one of the activities in the entire value chain from development through
production distractions, sales, and after-sales service is called ______.
A) Opportunity Cost
B) Vertical Integration
C) Relevant Cost
D) Avoidable Cost
B) Vertical Integration
Which of the following decisions involves deciding whether to accept or reject an order that is outside the scope of
normal sales?
A) Make or Buy
B) Special Order
C) Sell of Process Further
D) Keep or Drop
B) Special Order
Costs that have been incurred and cannot be eliminated regardless of the alternative chosen are ______.
A) Sunk Costs
B) Unavoidable Costs
C) Relevant Costs
D) Irrelevant Costs
A) Sunk Costs
The sensitivity of unit sales to changes in price is called ______.
A) Markup Percentage
B) Profit- Maximizing Price
C) Elasticity of Demand
D) Latitude
C) Elasticity of Demand
The potential benefit that is given up when one alternative is selected over another is called _______.
A) Relevant Cost
B) Avoidable Cost
C) Differential Cost
D) Opportunity Cost
D) Opportunity Cost
Latitude and private information are two components of _______ influence that impact the determination of selling
price.
A) Customers'
B) Competitors'
C) Costs'
D) Revenues"
When analyzing two alternatives which is NOT true?
A) Isolating relevant cost gives a different answer than using all costs
B) Isolating relevant costs is classed the differential cost approach
C) Mining irrelevant costs may cause confusion and distract attention from the information that is critical
A) Isolating relevant costs gives a different answer than using all costs
When a company does not have enough capacity to produce all of the products and sales volume demanded by their
customers, this leads to ______.
A) Keep or drop decisions
B) Volume trade-off decisions
C) Sell or process further decisions
D) Make or buy decisions
B) Volume trade-off decisions
Target cost is determined by subtracting the ______ from the anticipated selling price.
A) Manufacturing Overhead
B) Desired Profit
C) After-Sales Service Costs
D) Marketing Costs
B) Desired Profit
The first step in decision making is to:
A) Define the alternative
B) Perform a differential analysis
C) Identify relevant costs and benefits
A) Define the alternative
True or False: When deciding whether to take a train or drive for a weekend trip to visit an out-of-town friend, the
monthly fee a student pays to park at school is not relevant to the decision.
True
Anticipated selling price - Desired profit = ______ ______.
Target Cost
The potential benefit given up when selecting one alternative over another is a(n) ______ cost.
A) Opportunity
B) Avoidable
C) Irrelevant
D) Sunk
True or False: Opportunity costs are not found in accounting records because they are not relevant to decisions.
False
The potential benefit given up when selecting one alternative over another is a(n) ______.
,A) Sunk
B) Irrelevant
C) Opportunity
D Avoidance
C) Opportunity
When making decisions to either buy a movie ticket or rent a DVD, the cost of the movie ticket is a(n) _______ cost.
A) Incremental
B) Irrelevant
C) Avoidable
D) Sunk
A) Incremental
C) Avoidance
Steps in the absorption costing approach are:
A) Multiply unit production costs by 1+ markup percentage
B) determine markup percentage on absorption cost
C) Calculate unit product costs
D) Calculate the price elastically of demand
A) Multiply unit product cost by 1+ markup percentage
B) Determine markup percentage on absorption costing
C) Calculate unit product costs
Reference Value <= Value-Based Price <= EVC
C) Reference Value >= Value-Based >= EVC
D) Reference Value = The price of the best alternatives
C) Reference Value >= Value-Based >= EVC
Reasons to Isolate Relevant Cost
Enough information rarely available to prepare income statements
Prairie, Inc. produces a single product. It has an annual capacity of 10,000 units, but currently uses only 80% of it.
Each unit is sold for $50 and requires direct material worth $30 and direct labor worth $5. Manufacturing overhead
cost is $10 per unit of which 70% is variable. What is Prairie's total incremental cost incurred to produce each unit?
A) $30
B) $42
C) $35
D) $45
B) $42
Decision Making: Concepts
-Keep or Drop Decisions
-Make or Buy Decisions
-Special order Decisions
-Sell or Process Further Decisions
Decision Making: Six Key Concepts
1) Define the alternatives
2) Distinguish between relevant and irrelevant costs and benefits
3) Perform differential analysis
4) Identify sunk costs
, 5) Identify future costs and benefits that do not differ between alternatives
6) Identify opportunity costs
The involvement by a company in more than one of the activities in the entire value chain from development through
production distractions, sales, and after-sales service is called ______.
A) Opportunity Cost
B) Vertical Integration
C) Relevant Cost
D) Avoidable Cost
B) Vertical Integration
Which of the following decisions involves deciding whether to accept or reject an order that is outside the scope of
normal sales?
A) Make or Buy
B) Special Order
C) Sell of Process Further
D) Keep or Drop
B) Special Order
Costs that have been incurred and cannot be eliminated regardless of the alternative chosen are ______.
A) Sunk Costs
B) Unavoidable Costs
C) Relevant Costs
D) Irrelevant Costs
A) Sunk Costs
The sensitivity of unit sales to changes in price is called ______.
A) Markup Percentage
B) Profit- Maximizing Price
C) Elasticity of Demand
D) Latitude
C) Elasticity of Demand
The potential benefit that is given up when one alternative is selected over another is called _______.
A) Relevant Cost
B) Avoidable Cost
C) Differential Cost
D) Opportunity Cost
D) Opportunity Cost
Latitude and private information are two components of _______ influence that impact the determination of selling
price.
A) Customers'
B) Competitors'
C) Costs'
D) Revenues"
