Question 1

In a make or buy decision,the opportunity cost of capacity could

Accepted Answer

The answer of In a make or buy decision,the opportunity...

Question 2

Which of the following are relevant in a make or buy decision?
Variable              Avoidable fixed            Unavoidable fixed
$\text {\underline{  costs} }$                   $\text {\underline{  costs} }$                          $\text {\underline{  costs} }$

Accepted Answer

In a make or buy decision, both variable and avoidable fixed costs are relevant. Variable costs are costs that change with the level of production, such as labor and materials. Avoidable fixed costs are costs that can be eliminated if the company decides not to produce the product or service, such as rent or insurance. Unavoidable fixed costs, on the other hand, are costs that will be incurred regardless of whether the company makes or buys the product, such as property taxes or salaries of managers. Therefore, the best choice would be D, which includes both variable and avoidable fixed costs, but not unavoidable fixed costs.

Question 3

An increase in direct fixed costs could reduce all of the following except

Accepted Answer

Direct fixed costs are directly attributable to a product line and do not affect the corporate net income directly, as they are absorbed by the specific product line's performance metrics.

Question 4

In a make or buy decision,the reliability of a potential supplier is

Accepted Answer

The reliability of a potential supplier is a qualitative decision factor because it affects the decision-making process by considering the dependability and consistency of the supplier, which may not be easily quantified but is crucial for ensuring smooth operations and quality control.

Question 5

Assume a company produces three products: A,B,and C.It can only sell up to 3,000 units of each product.Production capacity is unlimited.The company should produce the product (or products)that has (have)the highest

Accepted Answer

To maximize profits, the company should produce the product(s) with the highest contribution margin per unit. This means that for every unit sold, the company will have more money left over to cover its fixed costs and generate profits. Since the production capacity is unlimited, the company should produce as many units as possible of the product(s) with the highest contribution margin per unit. Therefore, the best choice is to produce the product(s) that has (have) the highest contribution margin per unit, which is option C.

Question 6

In evaluating the profitability of a specific organizational segment,all ____ would be ignored.

Accepted Answer

Costs allocated to the segment would be ignored in evaluating the profitability of a specific organizational segment because these costs are not directly incurred by the segment itself but are allocated to it from the broader organization, potentially distorting the segment's true profitability.

Question 7

For a particular product in high demand,a company decreases the sales price and increases the sales commission.These changes will not increase

Accepted Answer

The product contribution margin will not increase because it is calculated as sales price minus variable costs. Decreasing the sales price reduces the contribution margin, and increasing sales commission increases variable costs, further reducing the contribution margin.

Question 8

The ____ prohibits companies from pricing products at different amounts unless these differences reflect differences in the cost to manufacture,sell,or distribute the products.

Accepted Answer

The Robinson-Patman Act prohibits companies from engaging in price discrimination by pricing products at different amounts unless these differences reflect differences in the cost to manufacture, sell, or distribute the products. The Internal Revenue Service and Governmental Accounting Office are government agencies that have different functions, and the Sherman Antitrust Act is focused on preventing monopolies and promoting competition in the marketplace.

Question 9

Which of the following costs is irrelevant in making a decision about a special order price if some of the company facilities are currently idle?

Accepted Answer

Equipment depreciation is an indirect cost and should not be considered in the decision-making process regarding special order price if some of the company facilities are currently idle. The relevant cost in this scenario would be only the direct materials, direct labor, and variable costs of utilities involved in fulfilling the special order. The opportunity cost of production should also be considered as it measures the cost of forgoing the next best alternative use of the idle facilities.

Question 10

When a company discontinues a segment,total corporate costs may decrease in all of the following categories except

Accepted Answer

Allocated common costs are typically spread across various segments of a company and do not decrease simply because one segment is discontinued. These costs are shared across the company's operations and would remain until specifically reduced through other cost-cutting measures.

Question 11

An outside firm selected to provide services to an organization is called a

Accepted Answer

An outside firm selected to provide services to an organization is referred to as a contract vendor.

Question 12

The minimum selling price that should be acceptable in a special order situation is equal to total

Accepted Answer

In a special order situation, the minimum selling price should cover all variable costs and any avoidable fixed costs to ensure that the company does not incur a loss from the order.

Question 13

Which of the following activities within an organization would be least likely to be outsourced?

Accepted Answer

Product design is a critical and core function for any organization, and outsourcing it can lead to a loss of control over the quality and innovation of the products. In contrast, accounting, data processing, and transportation are all support functions that can be outsourced without affecting the core competencies of the organization.

Question 14

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called

Accepted Answer

Outsourcing is the process of contracting with vendors outside the organization to obtain goods and/or services. Target costing is a cost management method, insourcing means doing work within the organization rather than outsourcing, and product harvesting refers to discontinuing a product line or service.

Question 15

An ad hoc sales discount is

Accepted Answer

An ad hoc sales discount is brought about by competitive pressures. It is a temporary reduction in the price of a product or service to encourage its sale, usually due to competition or to meet short-term sales objectives. It is not related to the quality of the product or a committee's decision.

Question 16

Fixed costs are ignored in allocating scarce resources because

Accepted Answer

Fixed costs are those costs that do not change with changes in the level of production or allocation of resources. Since they are unaffected by the allocation of scarce resources, they are not considered in the decision-making process when allocating resources. Sunk costs are also ignored in decision-making because they are costs already incurred and cannot be recovered regardless of the decision made.

Question 17

When a scarce resource,such as space,exists in an organization,the criterion that should be used to determine production is

Accepted Answer

When a scarce resource exists, it is important to focus on maximizing the contribution margin per unit of that scarce resource. This will ensure that the organization is utilizing the resource efficiently and effectively. Options A and B do not take into account the scarce resource, while option D only focuses on variable costs and not the resource allocation.

Question 18

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?

Accepted Answer

Maintaining a long-term relationship with suppliers can be a qualitative factor favoring the buy decision, as it may lead to better terms, reliability, and collaboration.

Question 19

A manager is attempting to determine whether a segment of the business should be eliminated.The focus of attention for this decision should be on

Accepted Answer

The most relevant information for the manager's decision is the profitability of the segment, which can be measured by determining the contribution margin. This is calculated as sales minus total variable expenses, which represents the amount that is available to cover the segment's fixed expenses and contribute to the overall profitability of the business. Avoidable fixed expenses are also considered in this calculation, as they are expenses that can be eliminated if the segment is discontinued. Therefore, the best choice is option D, which takes into account both variable and fixed expenses that are relevant to the decision.

Question 20

Which of the following are relevant in a make or buy decision?
$\text {\underline{ Prime costs} }$        $\text {\underline{ Sunk costs} }$              $\text {\underline{ Incremental costs} }$

Accepted Answer

Prime costs and incremental costs are relevant in a make or buy decision because they directly impact the cost of production or purchasing. Sunk costs are not relevant because they have already been incurred and cannot be recovered or changed by the decision.

Quiz 10: Relevant Information for Decision Making

In a make or buy decision,the opportunity cost of capacity could

Which of the following are relevant in a make or buy decision? Variable Avoidable fixed Unavoidable fixed $\text {\underline{ costs} }$ $\text {\underline{ costs} }$ $\text {\underline{ costs} }$

An increase in direct fixed costs could reduce all of the following except

In a make or buy decision,the reliability of a potential supplier is

Assume a company produces three products: A,B,and C.It can only sell up to 3,000 units of each product.Production capacity is unlimited.The company should produce the product (or products) that has (have) the highest

In evaluating the profitability of a specific organizational segment,all ____ would be ignored.

For a particular product in high demand,a company decreases the sales price and increases the sales commission.These changes will not increase

The ____ prohibits companies from pricing products at different amounts unless these differences reflect differences in the cost to manufacture,sell,or distribute the products.

Which of the following costs is irrelevant in making a decision about a special order price if some of the company facilities are currently idle?

When a company discontinues a segment,total corporate costs may decrease in all of the following categories except

An outside firm selected to provide services to an organization is called a

The minimum selling price that should be acceptable in a special order situation is equal to total

Which of the following activities within an organization would be least likely to be outsourced?

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called

An ad hoc sales discount is

Fixed costs are ignored in allocating scarce resources because

When a scarce resource,such as space,exists in an organization,the criterion that should be used to determine production is

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?

A manager is attempting to determine whether a segment of the business should be eliminated.The focus of attention for this decision should be on

Which of the following are relevant in a make or buy decision? $\text {\underline{ Prime costs} }$ $\text {\underline{ Sunk costs} }$ $\text {\underline{ Incremental costs} }$

Quiz 10: Relevant Information for Decision Making

In a make or buy decision,the opportunity cost of capacity could

Which of the following are relevant in a make or buy decision? Variable Avoidable fixed Unavoidable fixed costs‾ \text {\underline{ costs} } costs​ costs‾ \text {\underline{ costs} } costs​ costs‾ \text {\underline{ costs} } costs​

An increase in direct fixed costs could reduce all of the following except

In a make or buy decision,the reliability of a potential supplier is

Assume a company produces three products: A,B,and C.It can only sell up to 3,000 units of each product.Production capacity is unlimited.The company should produce the product (or products) that has (have) the highest

In evaluating the profitability of a specific organizational segment,all ____ would be ignored.

For a particular product in high demand,a company decreases the sales price and increases the sales commission.These changes will not increase

The ____ prohibits companies from pricing products at different amounts unless these differences reflect differences in the cost to manufacture,sell,or distribute the products.

Which of the following costs is irrelevant in making a decision about a special order price if some of the company facilities are currently idle?

When a company discontinues a segment,total corporate costs may decrease in all of the following categories except

An outside firm selected to provide services to an organization is called a

The minimum selling price that should be acceptable in a special order situation is equal to total

Which of the following activities within an organization would be least likely to be outsourced?

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called

An ad hoc sales discount is

Fixed costs are ignored in allocating scarce resources because

When a scarce resource,such as space,exists in an organization,the criterion that should be used to determine production is

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?

A manager is attempting to determine whether a segment of the business should be eliminated.The focus of attention for this decision should be on

Which of the following are relevant in a make or buy decision? Prime costs‾ \text {\underline{ Prime costs} } Prime costs​ Sunk costs‾ \text {\underline{ Sunk costs} } Sunk costs​ Incremental costs‾ \text {\underline{ Incremental costs} } Incremental costs​

Which of the following are relevant in a make or buy decision? Variable Avoidable fixed Unavoidable fixed $\text {\underline{ costs} }$ $\text {\underline{ costs} }$ $\text {\underline{ costs} }$

Which of the following are relevant in a make or buy decision? $\text {\underline{ Prime costs} }$ $\text {\underline{ Sunk costs} }$ $\text {\underline{ Incremental costs} }$