QUESTION 1 5.89 points Save Answer When a company is considering the option of processing its product further, to achieve higher sales revenues, they must ignore the cost that is required to produce the basic product, before processing further fact that will additional processing produce any environmental toxins additional costs necessary to process further incremental revenue that can be earned if processed further QUESTION 2 5.89 points Save Answer Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available Replacement Machine Old Machine $35,0 inal cost $45,00 aining useful life in years urrent age in vears Book value $25,00 urrent di sal value in cash $8,00 Future disposal value in cash (in 5 years) nual cash operating costs 7.00 Which of the information provided in the table is irrelevant to the replacement decision the price of the new machine the annual cash operating costs the current disposal value of the old machine the original cost of the old machine QUESTION 3 5.89 points Save Answer Rica Company is a price-taker and uses a target-pricing approach. Refer to the following information: Production volume 600,000 units pery $3 arket unit ired operating income 15%lof total assets $13,900,00 otal assets What is the target full product cost in total for the year? Assume all units produced are sold. $18,000,000 $13,900,000 $2,085,000 $15,915,000 QUESTION 4 5.89 points Save Answer Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp. The following per unit data are available Bedford Lam Lowell Lam $1 ariable costs achine hours required for 1 lam Total fixed costs are $30,000. Marketing data indicate that the company can sell up to 8,000 units of the Bedford lamp and up to 4,000 units of the Lowell lamp. Machine hour capacity is 25,000 hours per year. Which product mix will deliver the optimum operating income? 12,500 Bedford lamps and zero Lowell lamps 7,500 Bedford lamps and 3,000 Lowell lamps 4,500 Bedford lamps and 4,000 Lowell lamps 8,000 Bedford lamps and 2,250 Lowell lamps QUESTION 5 5.89 points Save Answer Which of the following statements describes a scenario when management should consider dropping a business division? The division has been reporting an operating loss consistently The division's avoidable fixed costs are less than its contribution margin. The division's unavoidable fixed costs are greater than its operating loss. The division's avoidable fixed costs are greater than its contribution margin. QUESTION 6 5.89 points Save Answer Which of the following is a major consideration when analyzing a special order? The company must have a good stock turnover ratio The sunk costs of the decision must not exceed the irrelevant costs. The price must be high enough to cover any incremental costs to fill the order. The profit margin of the special sale must be higher than the regular sales. QUESTION 7 5.89 points Save Answer Centric Sail Makers manufactures sails for sailboats. The company has the capacity to produce 35,000 sails per year, and is currently producing and selling 25,000 sails per year. The following information relates to current production: S17 ale r unit riable costs per unit: Manufacturi $2 Marketing and administrative otal fixed costs Manufacturi Marketing and administrative If a special sales order is accepted for 5,500 sails at a price of $150 per unit, and fixed costs remain unchanged, what is the change in operating income? (Assume the special sales order will require variable manufacturing costs and variable marketing and administrative costs.) Operating income increases by $825,000. Operating income increases by $385,000. OOperating income decreases by $825,000. Operating income decreases by $385,000. QUESTION 8 5.89 points Save Answer In deciding whether to drop its electronics product line, a company's manager should ignore the amount of unavoidable fixed costs the variable and fixed costs it could save by dropping the product line the revenues it would lose from dropping the product line the effect of dropping the electronics product line on the sales of its other products, like CDs QUESTION 9 5.89 points Save Answer Fixed costs that do not differ between two alternatives are relevant to the decision considered irrelevant to the decision important only if they represent a material dollar amount. considered opportunity costs QUESTION 10 5.89 points Save Answer A company is a price-taker when it has very high fixed costs it has considerable flexibility in setting prices of its products it operates in a highly competitive market its product is unique QUESTION 11 5.89 points Save Answer The contribution margin approach helps managers in short-term decision making because it reports only mixed costs it treats fixed manufacturing overhead as product cost it isolates costs by behavior it reports costs and revenues at present value QUESTION 12 5.89 points Save Answer Gabriel Metalworks produces a special kind of metal ingots which are unique, and it allows Gabriel to follow a cost-plus pricing strategy. Gabriel has $10,000,000 of assets and shareholders expect approximately 9% return on assets. Additional data are as follows: 400 units es volume $15 per unit ariable costs 1,500,00 xed cost ear Using the cost-plus pricing approach, what should be the price per unit? $20 $19 $22 $21 QUESTION 13 5.89 points Save Answer A company produces 100 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuit in-house but is considering outsourcing the circuits at a contract price of $28 each. Currently, the cost of producing circuits in-house includes variable costs of $26 per circuit and fixed costs of $5,000 per month. Assume the fixed costs are unavoidable, but that company could employ the vacated premises to earn rental income of $700 per month. How will it affect monthly operating income, if the company Operating income will go up by $4,800 Operating income will go up by $500 Operating income will go down by $2,800 Operating income will go down by $200 QUESTION 14 5.89 points Save Answer Faros Hats Inc. has two product lines-baseball helmets and football helmets. The income statement data for the most recent year is as follows: Total Baseball Helmets Football Helmets $500,000 $350,0 riable expenses (530,000 280,000 $320,00 $250,000 $70 ribution margin Fixed expenses 180,000 (90,000 erating income loss If $50,000 of fixed costs will be eliminated by dropping the Football Helmets line, how will dropping Football Helmets affect operating income of the company? Operating income will decrease by $90,000 Operating income will increase by $50,000. Operating income will increase by $70,000. Operating income will decrease by $20,000. QUESTION 15 5.89 points Save Answer Nordic Avionics makes aircraft instrumentation. Its basic navigation radio requires $80 in variable costs and requires $2,000 per month in fixed costs. If the company upgrades the radio further to enhance its functionality, it will require an additional $25 per unit of variable costs, plus an increase in fixed costs of $800 per month. The marketing manager believes that they would be able to boost the price of the radio from $260 to $300. Nordic sells 30 radios per month. If Nordic decides to produce the improved version of the radio, what would the impact be on monthly operating income? It would increase by $1,050 It would decrease by $750. It would increase by $250. It would decrease by $350. QUESTION 16 5.89 points Save Answer Which of the following is one of the keys to short-term business decision-making? focus on sunk costs and quantitative data focus on relevant costs and use the contribution margin approach focus on qualitative data only and ignore future cash flows focus on costs which do not change under two alternatives and on historic costs 5.89 points QUESTION 17 Save Answer The benefit foregone by not choosing an alternative course of action is referred to as a(n) opportunity cost. sunk cost. variable cost. incremental cost