Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 7, Problem 7.18E
Identify relevant costs for different decisions.
(LO 1,2,3,4,5,6), C
The costs listed below relate to a variety of different decision situations.
| Cost | Decision |
| 1. Unavoidable fixed |
Eliminate an unprofitable segment |
| 2. Direct labor | Make or buy |
| 3. Original cost of old equipment | Equipment replacement |
| 4. Joint production costs | Sell or process further |
| S. Opportunity cost | Accepting a special order |
| 6. Segment manager’s salary | Eliminate an unprofitable segment (manager will be terminated) |
| 7. Cost of new equipment | Equipment replacement |
| 8. Incremental production costs | Sell or process further |
| 9. Direct materials | Equipment replacement (the amount of materials required does not change) |
| 10. Rent expense | Purchase or lease a building |
Instructions
For each cost listed above, indicate if it is relevant or not to the related decision. For those costs determined to be irrelevant, briefly explain why.
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Answer
1. Which of the following costs/expenses is included in product costs under both
absorption costing and variable costing?
A) Equipment depreciation.
B) Variable manufacturing costs.
Variable selling expenses.
D) Supervisory salaries.
2. What is the costing method that can be used most easily with break-even analysis and
other cost-volume-profit techniques?
A) Process costing.
B) Job-order costing.
C) Absorption costing.
D) Variable costing.
3. The Predetermined Overhead Rate is $18.50 per machine hour. During the year, actual
manufacturing overhead expenses incurred were $456,000 and the machine operated for
24,550 hours. This means:
A) Manufacturing overhead is overapplied
B)
Before any adjustments, net income is understated
C) No journal entry is needed
D) The balance in the MOH account is zero
E) None of the above
4. Why would an activity-based costing system that is designed for internal decision
making NOT conform to generally accepted accounting principles?
A) First-stage…
Which of the following statements is false?
Multiple Choice
Examples of selling costs include shipping, sales commissions, and costs of finished goods warehouses.
Discretionary fixed costs may be altered in the short term by current managerial decisions.
A particular cost may be direct or indirect depending on the cost object.
All sunk costs should be ignored in making a decision.
Some of the conversion costs are period costs.
1. Cost: Salary of marketing manager
Decision: Project discontinuance: manager to be transferred elsewhere in the firm
Relevant or Irrelevant?
2. Cost: Home theater installation
Decision: Purchase of a new home
Relevant or Irrelevant?
3. Cost: Unavoidable fixed overhead
Decision: Plant closure
Relevant or Irrelevant?
Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2QCh. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q
Ch. 7 - Your roommate. Gale Dunham, is confused about sunk...Ch. 7 - Prob. 12QCh. 7 - The steps in managements decision-making process...Ch. 7 - Determine incremental changes. (LO 1), AP Bogart...Ch. 7 - At Bargain Electronics, it costs 30 per unit (20...Ch. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Prob. 7.6BECh. 7 - Prob. 7.7BECh. 7 - Lisah, Inc., manufactures golf clubs in three...Ch. 7 - Nathan T Corporation is comparing two different...Ch. 7 - Prob. 7.2DICh. 7 - Wilma Company must decide whether to make or buy...Ch. 7 - Prob. 7.4DICh. 7 - Prob. 7.5DICh. 7 - Prob. 7.6DICh. 7 - As a study aid. your classmate Pascal Adams has...Ch. 7 - Use incremental analysis for special-order...Ch. 7 - Moonbeam Company manufactures toasters. For the...Ch. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Use incremental analysis for make-or-buy decision....Ch. 7 - Prob. 7.7ECh. 7 - Prepare incremental analysis concerning...Ch. 7 - Anna Garden recently opened her own basketweaving...Ch. 7 - Stahl Inc. produces three separate products from a...Ch. 7 - Kirk Minerals processes materials extracted from...Ch. 7 - Prob. 7.12ECh. 7 - On January 2, 2016, Twilight Hospital purchased a...Ch. 7 - Use incremental analysis for retaining or...Ch. 7 - Veronica Mars, a recent graduate of Bells...Ch. 7 - Cawley Company makes three models of lasers....Ch. 7 - Tharp Company operates a small factory in which it...Ch. 7 - Identify relevant costs for different decisions....Ch. 7 - ThreePoint Sports Inc. manufactures basketballs...Ch. 7 - Use incremental analysis related to make or buy....Ch. 7 - Prob. 7.3APCh. 7 - Compute gain or loss, and determine if equipment...Ch. 7 - Brislin Company has four operating divisions....Ch. 7 - CURRENT DESIGNS Current Designs faces a number of...Ch. 7 - Decision-Making Across the Organization Aurora...Ch. 7 - MiniTek manufactures private-label small...Ch. 7 - Prob. 7.3BYPCh. 7 - Communication Activity Hank Jewell is a production...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Considering Your Costs and Benefits School costs...
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