Multiple-Choice-Questions
1. In a make-or-buy decision, the company
a. Must choose between expanding or dropping a product line.
b. Must choose between accepting or rejecting a special order.
c. Would consider the purchase price of the externally provided good to be relevant.
d. Would consider all fixed overhead to be irrelevant.
e. None of the above.
2. Carroll Company, a manufacturer of vitamins and minerals, has been asked by a large drug-store chain to provide bottles of vitamin E. The bottles would be labeled with the name of the drugstore chain, and the chain would pay Carroll $ 2.30 per bottle rather than the $ 3.00 regular price. Which type of a decision is this?
a. Make-or-buy
b. Special-order
c. Keep-or-drop
d. Economic order quantity
e. Markup pricing
3. Jennings Hardware Store marks up its merchandise by 80 percent. If a part costs $ 1.50, which of the following is true?
a. The price is $ 1.20.
b. The markup is $ 2.70.
c. Would consider the purchase price of the externally provided good to be relevant.
b. Special-order
c. The price is $ 2.70.
d. The markup is pure profit.
e. All of these.
4. When a company faces a production constraint or scarce resource (e. g., only a certain number of machine hours is available), it is important to
a. Produce the product with the highest contribution margin in total.
b. Produce the product with the lowest full manufacturing cost.
c. Produce the product with the highest contribution margin per unit of scarce resource.
d. Produce the product with the highest contribution margin per unit.
e. The constraint is not relevant to the production problem.
5. In the keep-or-drop decision, the company will find which of the following income statement formats most useful?
a. A segmented income statement in the contribution margin format
b. A segmented income statement in the full costing format that is used for financial reporting
c. An overall income statement in the contribution margin format
d. An overall income statement in the full costing format that is used for financial reporting
e. Income statements are of no use in making this type of decision.
6. In the sell-or-process-further decision,
a. Joint costs are always relevant.
b. Total costs of joint processing and further processing are relevant.
c. All costs incurred prior to the split-off point are relevant.
d. The most profitable outcome can be to further process some separately identifiable products beyond the split-off point, but sell others at the split-off point.
e. None of the above.
7. Which of the following is a reason for carrying inventory?
a. To balance setup and carrying costs
b. To satisfy customer demand
c. To avoid shutting down manufacturing facilities
d. To take advantage of discounts
e. All of these