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1. A cost is not relevant for decision making if it:
2. Variable costs will generally be relevant for decision making because they:
3. Fixed costs will often be irrelevant for short-term decision making because they:
4. A "special sales order" within the context of Chapter 11 is:
5. "Special sales orders," as this term is used in Chapter 11
6. "Committed" and "Sunk" costs are generally:
7. All of the following are characteristic of relevant costs except:
8. The major problem with relevant cost determination is that it fails to recognize the:
9. Depreciation expense is relevant in a decision only in the context of:
10. Operating at or near full capacity will require a firm considering a "special sales order" to
potentially recognize the:
11. Done on a regular basis, relevant cost pricing in "special-order decisions" can erode
normal pricing policies and lead to:
12. The value chain analysis used in connection with the "make-or-buy decision" often leads
a firm to make use of:
13. The decision to keep or drop products or services involves strategic consideration all of
the following except:
14. A useful device or concept for solving production problems involving multiple products
and limited resources is:
15. One of the behavioral problems with relevant cost analysis is a possible overemphasis
on:
16. When using relevant cost analysis, it is a common mistake for untrained managers to
include in their analysis all of the following except:
17. Which one of the following concepts is correct for determining relevant costs for
decision-making?
18. Which one of the following is most descriptive of a strategic analysis conducted as part of
a decision analysis?
19. Which one of the following issues would least likely be addressed during the regular
review of product profitability?
20. Determination of the optimum short-term product mix needs to include an analysis of:
21. Quirch Inc. manufactures machine parts for aircraft engines. The CEO, Chucky Valters,
was considering an offer from a subcontractor that would provide 2,400 units of product PQ107
for Valters for a price of $150,000. If Quirch does not purchase these parts from the
subcontractor it must produce them in-house with the following unit costs:
Cost per Unit
Direct materials $31
Direct labor 19
Variable overhead 8
In addition to the above costs, if Quirch produces part PQ107, it would also have a retooling and
design cost of $9,800. The relevant costs of producing 2,400 units of product PQ107 are:
22. A boat, costing $108,000 and uninsured, was wrecked the very first day it was used. It
can either be disposed for $11,000 cash and be replaced with a similar boat costing $110,000, or
rebuilt for $98,000 and be brand new as far as operating characteristics and looks are concerned.
A relevant cost analysis of the decision to replace the boat shows:
23. Walman Corp. manufactures products X, Y, and Z from a joint production process. Joint
costs are allocated to products on the basis of relative sales value at the split-off point.
Additional information is as follows:
X Y Z Total
Units produced 14,000 10,000 6,000 30,000
Joint costs $204,000 $90,000 $66,000 $360,000
Sales value at split-off ? 150,000 110,000 600,000
Additional costs for
further processing 38,000 30,000 22,000 90,000
Sales value if
processed further 348,000 185,000 147,000 680,000
Product X’s sales value at the split-off point is:
24. Walman Corp. manufactures products X, Y, and Z from a joint production process. Joint
costs are allocated to products on the basis of relative sales value at the split-off point.
Additional information is as follows:
X Y Z Total
Units produced 14,000 10,000 6,000 30,000
Joint costs $204,000 $90,000 $66,000 $360,000
Sales value at split-off ? 150,000 110,000 600,000
Additional costs for
further processing 38,000 30,000 22,000 90,000
Sales value if
processed further 348,000 185,000 147,000 680,000
Based solely on a relevant cost analysis, which of the three products should be manufactured by
Walman beyond the split-off point?
25. Joint (common) costs in a joint production process are relevant for determining:
26. In a joint production process, the allocation of joint (common) costs to each of the joint
products being produced is needed principally:
27. In a joint production process, joint product costs are:
28. Which of the following statements regarding a joint production process is not true?
29. In making a decision whether to accept or reject a "special sales order," managers need
critical information about all of the following except:
30. Zap Video Inc. produces two basic types of video games, Clash and Slash. Pertinent data
follow:
Clash Slash
Sales price (per unit) $240 $168
Costs (per unit):
Direct materials 67 31
Direct labor 36 60
Variable factory overhead (@ $15 per DLH) 60 30
Allocated fixed factory overhead (based on DLHs) 24 12
Marketing expenses (all variable) 35 24
Total costs 221 157
Operating income (per unit) $18 $11
There is insufficient labor capacity in the plant to meet the combined demand for both Clash and
Slash.
Both products are produced through the same production departments.
The contribution margin
per
unit
for Clash is:
