Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Textbook Question
Chapter 8, Problem 8MCQ
In a make-or-buy decision,
- a. the company must choose between expanding or dropping a product line.
- b. the company must choose between accepting or rejecting a special order.
- c. the company would consider the purchase price of the externally provided good to be relevant.
- d. the company would consider all fixed
overhead to be irrelevant. - e. None of these.
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Which of the following statements are false? SELECT ALL THAT APPLY
a. One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is.
b. A new fixed cost that must be paid if a special offer is accepted is not relevant in making the decision.
c. A cost that will be incurred regardless of which course of action a manager takes is relevant to the manager's decision.
d. Your Company is considering replacing Machine X. The original cost of Machine X is not relevant to this decision.
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C
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Which of the following is not a factor to consider when deciding whether to accept a special order?
Select one:
O
A. Whether this order will hurt the brand name of the company
B. Whether the offered price is sufficient to cover prime costs and fixed overhead allocated
C. Whether other potential orders would be more profitable
D. Whether additional fixed costs would need to be incurred
E. All of the above
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.
Chapter 8 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 8 - What is the difference between tactical and...Ch. 8 - Prob. 2DQCh. 8 - What role do past costs play in relevant costing...Ch. 8 - Explain why depreciation on an existing asset is...Ch. 8 - Give an example of a future cost that is not...Ch. 8 - Can direct materials ever be irrelevant in a...Ch. 8 - Why would a firm ever offer a price on a product...Ch. 8 - What is a segment?Ch. 8 - Prob. 9DQCh. 8 - Discuss the importance of complementary effects in...
Ch. 8 - Prob. 11DQCh. 8 - Suppose that a product can be sold at split-off...Ch. 8 - Prob. 13DQCh. 8 - Which of the following is not a step in the...Ch. 8 - Costs that cannot be affected by any future action...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Which of the following statements is false? a....Ch. 8 - Prob. 7MCQCh. 8 - In a make-or-buy decision, a. the company must...Ch. 8 - Carroll Company, a manufacturer of vitamins and...Ch. 8 - Prob. 10MCQCh. 8 - Garrett Company provided the following...Ch. 8 - Jennings Hardware Store marks up its merchandise...Ch. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - In the sell-or-process-further decision, a. joint...Ch. 8 - Structuring a Make-or-Buy Problem Fresh Foods, a...Ch. 8 - Structuring a Special-Order Problem Harrison Ford...Ch. 8 - Segmented Income Statement Gorman Nurseries Inc....Ch. 8 - Prob. 19BEACh. 8 - Prob. 20BEACh. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Calculating Price by Applying a Markup Percentage...Ch. 8 - Calculating a Target Cost Yuhu manufactures cell...Ch. 8 - Structuring a Make-or-Buy Problem Coed Scents, a...Ch. 8 - Structuring a Special-Order Problem Rabbit Foot...Ch. 8 - Prob. 28BEBCh. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Prob. 32BEBCh. 8 - Prob. 33BEBCh. 8 - Prob. 34BEBCh. 8 - Brief Exercise 8-35 Calculating a Target Cost...Ch. 8 - Model for Making Tactical Decisions The model for...Ch. 8 - Prob. 37ECh. 8 - Use the following information for Exercises 8-38...Ch. 8 - Prob. 39ECh. 8 - Prob. 40ECh. 8 - Prob. 41ECh. 8 - Prob. 42ECh. 8 - Prob. 43ECh. 8 - Prob. 44ECh. 8 - Prob. 45ECh. 8 - Sell at Split-Off or Process Further Bozo Inc....Ch. 8 - Use the following information for Exercises 8-47...Ch. 8 - Prob. 48ECh. 8 - Calculating Price Using a Markup Percentage of...Ch. 8 - Target Costing H. Banks Company would like to...Ch. 8 - Keep or Buy, Sunk Costs Heather Alburty purchased...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Prob. 54PCh. 8 - Prob. 55PCh. 8 - Segmented Income Statement, Management Decision...Ch. 8 - Make or Buy, Qualitative Considerations Hetrick...Ch. 8 - Sell or Process Further Zanda Drug Corporation...Ch. 8 - Keep or Drop AudioMart is a retailer of radios,...Ch. 8 - Accept or Reject a Special Order Steve Murningham,...Ch. 8 - Cost-Based Pricing Decision Jeremy Costa, owner of...Ch. 8 - Product Mix Decision, Single Constraint Sealing...Ch. 8 - Special-Order Decision, Qualitative Aspects Randy...Ch. 8 - Sell or Process Further, Basic Analysis Shenista...Ch. 8 - Product Mix Decision, Single Constraint Norton...Ch. 8 - Sell at Split-Off or Process Further Eunice...Ch. 8 - Differential Costing As pointed out earlier in...Ch. 8 - Prob. 68CCh. 8 - Keep or Drop a Division Jan Shumard, president and...
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- Which of the following is NOT a factor to be considered in a make or buy decision? O the availability of productive capacity O the effect on the future business relationship with a supplier O the fact that fixed factory overhead will not change O the fact that variable costs will not changearrow_forwardFor each situation, list the assumption, principle, or constraint that has been violated, if any. List only one answer for each situation. a. East Lake Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain. choose one of the assumption, principle or constraint Going concern assumptionPeriodicity assumptionNo violationHistorical cost principleRevenue recognition principleEconomic entity assumption b. Hilo Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.) choose one of the assumption, principle or constraint Historical cost principleGoing concern assumptionRevenue recognition principleNo violationPeriodicity assumptionEconomic entity assumption c. Gomez, Inc. is…arrow_forward“A company should not allocate costs that are fixed in the short run to customers.” Do you agree? Explain briefly.arrow_forward
- When companies consider outsourcing a product, fixed costs are always irrelevant. Question 31 options: True Falsearrow_forwardHow do we decide whether to accept a special order? Which costs are relevant? What other factors should a manager consider? How does opportunity costs enter into the make or buy decision? What other factors should a manager consider to buy the product elsewhere? What is a constraint? Give an example? What other factors should a manager consider when taking into consideration a constraint? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardWhich of the following is not a consideration when a manager is deciding to discontinue a product or product line? Whether the product has a positive or negative contribution margin. Determining if direct fixed costs could be avoided if the product or product line is discontinued. If discontinuing the product or product line will affect sales of remaining products. Not having any free capacity.arrow_forward
- In a make versus buy decision which of thefollowing factors is not relevant? fixed production costsreliability of supplierreliability of bought-in productsopportunity cost of alternative activitiesarrow_forwardWhy would management be concerned about the accuracy of product costs?arrow_forwardWhich of the following is not an application of cost-volume-profit analysis? Setting prices for products and services. Performing strategic “what-if” analyses. Deciding whether to cut a product line. Determining the short-term cost or profit implications of many decisions. Deciding whether to make or buy a given product or service.arrow_forward
- i.“Differential Costs” are considered as relevant, where as “sunk Cost ” is considered asirrelevant for decision making purposes. Explain ii. Why opportunity cost is measured and relate with the evaluation of alternative, can it bean opportunity loss? iii. Which one either spoiled goods or defective goods are less economical for the companyand why?arrow_forwardWhen deciding to accept a special order, which of the following costs are relevant? A. Fixed production costs (no), normal selling price (yes) B. Fixed production costs (no), normal selling price (no) C. Fixed production costs (yes), normal selling price (yes) D. Fixed production costs (yes), normal selling price (no)arrow_forwardWhat is the rationale behind treating period costs as current expenses? a. Period costs are uncontrollable b. Period costs are immaterial c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions d. Period costs will occur whether or not production occurs and so it is improper to allocate these costs to production and defer a current cost of doing businessarrow_forward
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