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| 1 | |
Jim Cain, a management accountant employed by the United Brewing Company, was investigating the outsourcing of the company’s delivery fleet. He received information about the following during his investigation.
The total acquisition costs of the current delivery fleet. <BR><BR>
The depreciation expense incurred on the current delivery fleet over the past twelve months and the accumulated depreciation to date for each individual delivery vehicle.<BR><BR>
The maintenance expense, such as servicing and repairs, for each individual delivery vehicle incurred over the past twelve months. Most of this maintenance and repairs was completed in-house by the delivery vehicle maintenance team.
The replacement tyres for four delivery vehicles purchased three months ago.<BR>
The disposal value of the current delivery fleet.<BR><BR>
Which of the above information is relevant for making a decision regarding the outsourcing of the company’s delivery fleet? |
| | A) | The total acquisition costs of the delivery fleet. |
| | B) | The depreciation expense incurred on the delivery fleet over the past twelve months and the accumulated depreciation to date for each individual delivery vehicle. |
| | C) | The maintenance expense, such as servicing and repairs, for each individual delivery vehicle incurred over the past twelve months. |
| | D) | The disposal value of the existing delivery fleet. |
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| 2 | |
Jim Cain, a management accountant employed by the United Brewing Company, was investigating the outsourcing of the company’s delivery fleet. He received information about the following during his investigation: The total contracted cost of outsourcing the delivery fleet for the next ten years. The retrenchment/retirement benefits that will be required to be paid to the delivery drivers who will no longer be employed by United Brewing. The retrenchment/retirement benefits that will be required to be paid to the in-house delivery vehicle maintenance team as they will no longer be employed by United Brewing. The total annual cost saving forecast for the next ten years, accruing to United Brewing Company if the outsourcing of the delivery fleet is undertaken. The total acquisition cost of the current delivery fleet owned by United Brewing. Which of the above is a sunk cost and irrelevant when making a decision regarding the outsourcing of the company’s delivery fleet? |
| | A) | The total acquisition cost of the current delivery fleet owned by United Brewing. |
| | B) | The retrenchment/retirement benefits that will be required to be paid to the delivery drivers who will no longer be employed by United Brewing. |
| | C) | The retrenchment/retirement benefits that will be required to be paid to the in-house delivery vehicle maintenance team as they will no longer be employed by United Brewing. |
| | D) | The total annual cost saving forecast for the next ten years, accruing to United Brewing Company if the outsourcing of the delivery fleet is undertaken. |
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| 3 | |
Which of the following costs is a relevant cost? |
| | A) | An incremental cost. |
| | B) | A sunk cost. |
| | C) | A past cost. |
| | D) | A future cost. |
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| 4 | |
Tactical decisions, such as deciding to accept or reject a special order or whether to sell or process further a joint product, have which one of the following features? |
| | A) | Require large outlays in capacity-related resources. |
| | B) | Require large decreases in capacity-related resources. |
| | C) | Do not usually require significant increases or decreases in capacity-related resources. |
| | D) | Are of a long-term, strategic nature. |
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| 5 | |
A model of the decision-making process includes which of the following series of steps? |
| | A) | Clarify the problem, collect the relevant costs and benefits, and select an alternative. |
| | B) | Clarify the problem, identify the alternatives, collect the relevant costs and benefits, compare the costs and benefits of each alternative, and select an alternative. |
| | C) | Clarify the problem, identify the alternatives, compare the costs and benefits of each alternative, and select an alternative. |
| | D) | Identify the alternatives, collect the relevant costs and benefits, compare the costs and benefits of each alternative, and select an alternative. |
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| 6 | |
Jim Cain, a management accountant employed by the United Brewing Company, was investigating the outsourcing of the company’s delivery fleet. Jim has forecast that there is an annual saving of $1 500 000 in costs, such as the wages of delivery drivers and maintenance team members and the wages and salaries of ancillary delivery fleet personnel. These costs will no longer need to be spent by United Brewing Company if the proposal to outsource the delivery fleet is accepted by the board. The forecast of $1 500 000 annual savings in wages and salaries is a(n): |
| | A) | unavoidable cost |
| | B) | avoidable cost |
| | C) | sunk cost |
| | D) | out-of-pocket cost |
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| 7 | |
Mickleham Manufacturing Company uses 15 000 units of a particular component in its production process. The costs required to make the component are: direct materials of $20, direct labour of $15, variable manufacturing overhead of $9 and fixed manufacturing overhead of $10. Mickleham Manufacturing Company has received a quote of $50 from a potential supplier for this component. If Mickleham Manufacturing Company buys the component, 60% of the fixed manufacturing overhead would continue to be incurred. Mickleham would be better off spending: |
| | A) | $60 000 to purchase the component |
| | B) | $165 000 to manufacture the component |
| | C) | $30 000 to manufacture the component |
| | D) | $225 000 to purchase the component |
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| 8 | |
Glamorous Gemma Company manufactures lip gloss. Glamorous Gemma can manufacture 250 000 units of lip gloss a year at a variable cost of $750 000 and a fixed cost of $180 000. Based on Glamorous Gemma’s predictions, 200 000 units of lip gloss will be sold at the regular price of $5 each. A special order has been placed for 40 000 units to be sold at a 25% discount. The incremental profit per unit if Glamorous Gemma decides to accept the special order is: |
| | A) | $5 |
| | B) | $3.75 |
| | C) | $2.50 |
| | D) | $0.75 |
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| 9 | |
Glamorous Gemma Company manufactures lip gloss. Glamorous Gemma can manufacture 250 000 units of lip gloss a year at a variable cost of $750 000 and a fixed cost of $180 000. Based on Glamorous Gemma’s predictions, 200 000 units will be sold at a regular price of $5 each. A special order has been placed for 60 000 units to be sold at a 25% discount. When deciding whether to accept the special order, or not, the 10 000 units that are no longer being sold at the regular price are considered: |
| | A) | a fixed cost |
| | B) | a variable cost |
| | C) | a sunk cost |
| | D) | an opportunity cost |
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| 10 | |
Glamorous Gemma Company manufactures lip gloss. Glamorous Gemma can manufacture 250 000 units of lip gloss a year at a variable cost of $750 000 and a fixed cost of $180 000. Based on Glamorous Gemma’s predictions, 200 000 units will be sold at a regular price of $5 each. A special order has been placed for 60 000 units to be sold at a 25% discount. If Glamorous Gemma decides to accept the special order, the incremental profit is: |
| | A) | $225 000 |
| | B) | $75 000 |
| | C) | $50 000 |
| | D) | $25 000 |
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