Advanced Multiple Choice Quiz

Advanced Multiple Choice Quiz

Advanced Multiple Choice Quiz
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1	A cost is not relevant to a particular decision if: (Learning Objective 1 Ch 9)
	A)	It involves the movement of cash
	B)	It is a future cost
	C)	It will change as a result of the decision
	D)	It is a sunk cost

2	When deciding whether to replace old equipment, which of the following costs is not relevant to the decision? (Learning Objective 2 Ch 9)
	A)	Purchase price of the new equipment
	B)	Purchase price of the old equipment
	C)	Running costs of the new equipment
	D)	Running costs of the old equipment

3	The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses: Ad MCQs Ch9Q3 Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income of: (Learning Objective 3 Ch 9)
	A)	£100,000.
	B)	£150,000
	C)	£(140,000).
	D)	£50,000.

4	Manor Company plans to discontinue a department that has a contribution margin of £24,000 and £48,000 in fixed costs. Of the fixed costs, £21,000 cannot be eliminated. The effect of this discontinuance on Manor's net operating income would be a(an) (Learning Objective 3 Ch 9)
	A)	decrease of £3,000.
	B)	increase of £3,000.
	C)	decrease of £24,000.
	D)	increase of £24,000.

5	The next 2 questions are based on the following information: Ahrends Company makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Ad MCQs Ch9Q5 An outside supplier has offered to sell the company all of these parts it needs. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be £273,000 per year. If the part were purchased from the outside supplier, all of the direct labour cost of the part would be avoided. However, £8.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. Calculate the relevant fixed costs for this decision (Learning Objective 4 Ch 9)
	A)	£574,000.
	B)	£623,000.
	C)	£1,197,000
	D)	£1,267,000.

6	What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 70,000 units required each year? (Learning Objective 4 Ch 9)
	A)	£50.60
	B)	£3.90
	C)	£58.80
	D)	£54.90

7	Farnsworth Television makes and sells television sets. Each television regularly sells for £200. The following cost data per television are based on a full capacity of 12,000 televisions produced each period: Ad MCQs Ch9Q7 Both materials and labour are variable costs. Farnsworth has received a special order for a sale of 2,500 televisions to an overseas customer. Shipping costs incurred on this order would be £10 per television. Farnsworth is now selling 7,200 televisions through regular distributors each period. What should be the minimum selling price per television in negotiating a price for this special order? (Learning Objective 5 Ch 9)
	A)	£200
	B)	£166
	C)	£178
	D)	£176

8	Consider the following production and cost data for two products, Q and P: Ad MCQs Ch9Q8 A total of 400 machine hours are available each period and there is virtually unlimited demand for each product. What is the largest possible total contribution margin that can be realised each period? (Learning Objective 6 Ch 9)
	A)	£120,000
	B)	£144,000
	C)	£456,000
	D)	£132,000

9	Joint costs are not relevant to the decision to sell a product at the split-off point or to process the product further (Learning Objective 7 Ch 9)
	A)	True
	B)	False

10	Gary Company produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows: Ad MCQs Ch9Q10a If the cost of raw material input is £150,000, which of the products should be processed beyond the split-off point? Ad MCQs Ch9Q10b (Learning Objective 7 Ch 9)
	A)	Option A
	B)	Option B
	C)	Option C
	D)	Option D

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Home > Chapter 9 > Advanced Multiple Choice Quiz

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