1. Jones Inc. is considering dropping its specialty product line and has assembled the following information:

Sales	$190,000
Variable costs	120,000
Contribution margin	70,000
Less: Fixed costs	88,000
Net loss	($18,000)

$30,000 of the fixed costs is for depreciation on equipment that can be used for other products. What is the benefit or loss of keeping the specialty product line?

a.$(18,000)

b.$12,000

c.$48,000

d.$(48,000)

2. In a keep-or-drop decision:

a.fixed costs should be ignored.

b.absorption costing income statements should be provided.

c.sunk costs should be included.

d.segmented reports prepared on a variable-costing basis are important.

3. When managers consider a product mix, _____.

a.they must choose the alternative that maximizes total contribution margin

b.they must choose the alternative that minimizes sales dollars

c.they must choose the alternative that maximizes variable cost per unit

d.they must choose the alternative that minimizes fixed cost per unit

4. Beta Company manufactures laptops and is designing a new model that has very advanced features, which Beta hopes consumers will view as high-end features. The new laptop has a target price of $900. Management requires a 20% profit on new product revenues. Calculate the target cost of the laptop.

a.$720

b.$900

c.$180

d.$1,080

5. Ace Manufacturing produces two products: A and B. Unit contribution margins for A and B are $20 and $60 respectively. Product A uses 2 direct labor hour, and product B uses 4 direct labor hours. Direct labor is Ace's constrained resource. What is the contribution margin per direct labor hour for each product?

a.$20 for Product A and $240 for Product B

b.$240 for Product A and $10 for Product B

c.$240 for Product A and $60 for Product B

d.$10 for Product A and $15 for Product B

6. An advantage of target costing is that:

a.it does not consider the design phase of a product.

b.it considers only the cost of production.

c.it is useful in the decision to keep inventory.

d.it forces managers to control costs.

7. Decisions that involve choosing between different alternatives that attempt to provide a competitive advantage over a particular time frame are called:

a.relevant decisions.

b.strategic decisions.

c.short-term decisions.

d.tactical decisions.

8. Which of the following is true of opportunity cost?

a.It is the benefit foregone when one alternative is chosen over another.

b.Only variable opportunity costs are relevant in the decision-making process.

c.It is a cost that will not be affected by any future action by a firm.

d.Only fixed opportunity costs are relevant in the decision-making process.

9. Which of the following is true of target pricing?

a.It recognizes that only 50% of a product's cost becomes committed by the time it reaches the design stage.

b.It requires the use of fewer materials, labor, and processes during production, delivery and customer service.

c.It applies a uniform markup to the cost of a product and then prices are adjust accordingly.

d.It aims to increase cost on redesigning the product during the production stage.

10. Which of the following is an example of a direct fixed cost?

a.Cost of printing annual reports

b.Salary of a Chief Executive Officer

c.Salary of a receptionist

d.Cost of a mold for a product

11. Which of the following mathematical techniques is used to solve a product mix problem in the presence of multiple constraints?

a.Linear programming

b.The conjoint theory

c.Regression analysis

d.The least squares method