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| 1 | |
Which of the following best describes Relevant Information? |
| | A) | Focused on the past and differs between the alternatives under consideration. |
| | B) | Focused on the past and not related to the decision under consideration. |
| | C) | Focused on the future and differs between the alternatives under consideration. |
| | D) | Focused on the future and not related to the decision under consideration. |
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| 2 | |
Which of the following best describes a Sunk Cost? |
| | A) | Focused on the past and differs between the alternatives under consideration. |
| | B) | Focused on the past and not relevant to the decision under consideration. |
| | C) | Focused on the future and differs between the alternatives under consideration. |
| | D) | Focused on the future and not related to the decision under consideration. |
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| 3 | |
Another term for Differential Revenues is |
| | A) | Sunk Revenues |
| | B) | Opportunity Revenues |
| | C) | Future Revenues |
| | D) | Relevant Revenues |
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| 4 | |
Another term for Relevant Costs is |
| | A) | Avoidable Costs |
| | B) | Future Costs |
| | C) | Opportunity Costs |
| | D) | Sunk Costs |
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| 5 | |
Which of the following is not considered to be a unit-level cost? |
| | A) | Cost of the condenser put in the air conditioner. |
| | B) | Cost of assembling the air conditioner. |
| | C) | Cost of moving the box of condensers to be assembled |
| | D) | Cost of inspecting the air conditioner. |
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| 6 | |
Which of the following is not considered to be a product-level cost? |
| | A) | Cost of the engineer to maintain the product's design specifications. |
| | B) | Cost of the attorney to obtain the product's patent. |
| | C) | Cost of holding inventory for the product. |
| | D) | Cost of the supervisor to assure assembly of all products on the assembly line |
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| 7 | |
Which of the following is not considered to be a facility-level cost? |
| | A) | Cost of Property Insurance. |
| | B) | Cost of personnel administration. |
| | C) | Cost of Liability Insurance for only one of the product lines. |
| | D) | Cost of building security. |
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| 8 | |
Which of the following is the best way to consider a product-level cost?. |
| | A) | A product-level cost can be avoided when a product line is discontinued. |
| | B) | A product-level cost can be avoided when a there is change in the production schedule so the product is not produced this week. |
| | C) | A product level cost can be avoided when a business segment is discontinued. |
| | D) | A product level cost can be avoided when the corporation is dissolved. |
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| 9 | |
In evaluating the differences between two printers, which of the following would be a qualitative aspect of making the decision? |
| | A) | The number of copies produced per minute is different. |
| | B) | The dimensions of one of the printers require purchasing a new table. |
| | C) | The printers will collate output at different rates. |
| | D) | The color of one of the printers matches the color of the computer it will be attached to. |
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| 10 | |
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Apex received an order for 400 units from a new customer in a country in which Apex has never done business. This customer would like to spend $160 per air conditioner. Apex has capacity to produce 5,500 units. Should they accept the order? |
| | A) | Yes, they can make $15,200 |
| | B) | Yes, they can make $ 6,400 |
| | C) | No, they would lose $37.80 per unit. |
| | D) | No, existing customers would also want a lower price. |
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| 11 | |
<![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526797/378173/ch05_10instruct.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>]]>
Apex is evaluating an opportunity to rent the space it has for its excess capacity for $5,000. Should they still accept the special order in Question 10? |
| | A) | No, there are risks in accepting the order related to waste and warranty that Apex is better off taking the rental income. |
| | B) | No, the opportunity cost of not accepting the rental income is greater than the revenue from the special order. |
| | C) | Yes, the revenue from the special order is larger than the opportunity cost from renting the space. |
| | D) | Yes, the opportunity cost related to the rent is not relevant to this decision. |
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| 12 | |
<![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526797/378173/ch05_10instruct.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>]]>
The customer in question 10 now wants to have a special logo on the air conditioner so that it will be more competitive in their country. Applying this logo will take 1/2 hour. Assuming Apex can also rent the space in question 11, should Apex accept the special order or the rental? |
| | A) | Special Order because they have already agreed to produce the units. |
| | B) | Special Order because Apex will have more revenue than costs. |
| | C) | Rental because the total cost now exceeds the revenue. |
| | D) | Rental because there are risks in accepting the order related to waste and warranty that Apex is better off taking the rental income. |
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| 13 | |
<![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526797/378173/ch05_10instruct.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>]]>
Apex received an offer from another company to manufacture the same quality air conditioners for them at $165. Should Apex let someone else manufacture all 5,000 air conditioners and they just distribute them? |
| | A) | No, Apex should control the manufacturing process. |
| | B) | No, Apex can expect profitability to decline $16,000 if they outsource production. |
| | C) | Yes, Apex can expect profitability to increase $164,000 if they outsource production. |
| | D) | Yes, Apex can expect profitability to increase $180,000 if they outsource production. |
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| 14 | |
<![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526797/378173/ch05_10instruct.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>]]>
While evaluating the offer to outsource in question 13, Apex realized they could rent their manufacturing space for $ 50,000. Now, should Apex outsource the manufacture of the air conditioners? |
| | A) | No, Apex should control the manufacturing process. |
| | B) | No, Apex can expect profitability to decline $34,000 if they outsource production. |
| | C) | Yes, Apex can expect profitability to increase $34,000 if they outsource production. |
| | D) | Yes, Apex can expect profitability to increase $50,000 if they outsource production. |
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| 15 | |
<![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073526797/378173/ch05_10instruct.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (18.0K)</a>]]>
Apex has just received a multi-year order for an additional 400 units a year at the regular sales price. This brings budgeted production to 5,400. If Apex's management believes that the 5,400 unit level will continue should they still accept the outsourcing and facility rental option discussed in question 13 & 14? |
| | A) | Yes, they can expect total profitability to increase $116,000. |
| | B) | Yes, they can expect total profitability to increase $25,600. |
| | C) | No, they can expect total profitability to decline $25,600. |
| | D) | No, with a relevant difference of $3.20 per unit even at 5,400 units they are better off outsourcing and renting the facility. |
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| 16 | |
ABC Company has a machine with a 7 year useful life for which they paid $160,000, on 01/02/x5, with an expected $6,000 salvage value. On 01/02/x8, they have owned the machine for 3 years and have found a technologically advanced machine that costs $80,000. It has a 4-year useful life and $12,000 salvage value. The machine will save $10,000 a year in operating expenses.
The current machine can be sold for $40,000.
The issue faced by ABC Company is whether to acquire the new machine or continue to use the original machine. There are a variety of relevant factors to be included in the decision. Which of the following is relevant? |
| | A) | The original cost of the machine was $160,000. |
| | B) | The old machine has a salvage value of $6,000 and the new machine has a salvage value of $12,000. |
| | C) | The old machine has a depreciation expense of $22,000 and the new machine would have a depreciation expense $17,000. |
| | D) | The old machine has only been used for 3 years and has a lot of productivity left. |
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| 17 | |
ABC Company has a machine with a 7 year useful life for which they paid $160,000, on 01/02/x5, with an expected $6,000 salvage value. On 01/02/x8, they have owned the machine for 3 years and have found a technologically advanced machine that costs $80,000. It has a 4-year useful life and $12,000 salvage value. The machine will save $10,000 a year in operating expenses.
The current machine can be sold for $40,000.Should ABC Company keep the existing machine? |
| | A) | No, ABC suffers a $54,000 loss by disposing of the machine. |
| | B) | Yes, ABC saves $6,000. |
| | C) | Yes, the old machine has a book value of $94,000 and the new machine only costs $80,000. |
| | D) | Yes, selling the old machine is proper because it only has a $6,000 salvage value and we can sell it for a $40,000 gain. |
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| 18 | |
ABC Company has a machine with a 7 year useful life for which they paid $160,000, on 01/02/x5, with an expected $6,000 salvage value. On 01/02/x8, they have owned the machine for 3 years and have found a technologically advanced machine that costs $80,000. It has a 4-year useful life and $12,000 salvage value. The machine will save $10,000 a year in operating expenses.
The current machine can be sold for $40,000.If the decision to keep the existing machine is made based upon the financial impact for the year to end 12/31/x8, would ABC Company purchase the new machine (assume the machine can still be sold for $40,000? |
| | A) | Yes, the company benefits $3,000. |
| | B) | Yes, the new machine has less depreciation that the old machine. |
| | C) | No, keeping the old machine results in better operations and less cost for 20x8. |
| | D) | No, replacing the old machine would result in higher costs for 20x8. |
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| 19 | |
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They can sell everything they can produce. Due to the condenser coils they can not stack air conditioners on top of each other and can only store one air conditioner per pallet. They can store eight fans per pallet. They have limited warehouse space. Which product should they sell? |
| | A) | Fans because the contribution margin per pallet is $240. |
| | B) | Air conditioners because the sales price per unit of $600 is higher. |
| | C) | Air conditioners because the contribution margin per unit of $200 is larger than $30 per fan. |
| | D) | There is not enough information to answer this question. |
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| 20 | |
Which acronym represents a theory concerned with managing bottlenecks to increase profitability? |
| | A) | JIT |
| | B) | TOC |
| | C) | TQM |
| | D) | ABC |
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| 21 | |
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The President of Smithtown wants to close the Filter Division. He has given you the above information. What is your best recommendation based upon the information presented? |
| | A) | This is a good idea because the Filter Division is not covering total expenses. |
| | B) | This is a good idea because all divisions must be able to cover their fair share of Corporate allocated expenses. |
| | C) | This is not a good idea because the division has a lot of employees that would be out of work if the Filter Division closed. |
| | D) | This is not a good idea because the Filter Division can cover its Operating Expenses. |
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| 22 | |
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What is a qualitative consideration that Smithtown should not consider? |
| | A) | The dollar impact of not having the sales to customers outside of Smithtown. |
| | B) | The impact on the Smithtown Divisions that would have to replace the Filter Division has a supplier. |
| | C) | The impact on customers that may purchase other Smithtown products because they can get the filters through Smithtown. |
| | D) | The impact on quality of products built with the Filter Division Products. |
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| 23 | |
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Based upon this analysis what is your recommendation? |
| | A) | To not acquire the new equipment because it has higher annual operating expenses in 20x6 – 20x8 than 20x4 – 20x5. |
| | B) | To not acquire the new equipment because total expenses in 20x4 would be higher if the old equipment is replaced than if it were not replaced. |
| | C) | To acquire the new equipment because new equipment must be able to produce better products than the old equipment. |
| | D) | To acquire the new equipment because the net cost over the five year period is lower. |
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| 24 | |
In many situations Variable Costs can act as proxies for: |
| | A) | Qualitative Costs |
| | B) | Sunk Costs |
| | C) | Avoidable costs |
| | D) | Opportunity Costs |
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