1. Question 1 The Casey Company produces two joint products. At the split-off point, product A has a sales value of $8 per unit, while product B can be sold for $10 per unit. After further processing, which costs $5 and $9, respectively, product A can be sold for $12 and product B for $22 per unit. Which, if any, of the two products should be processed further?
2. A.Product B
3. B.Product A
4. C.Product A and B
5. D.Neither product A or B

2 points

Question 2

1. Joint products should be processed after the split-off point only if the difference in expected selling price at the split-off point and after further processing exceeds the per unit cost of processing after the split-off point.
2. True
3. False

2 points

Question 3

1. Variable costs are relevant in deciding whether or not to drop a product.
2. True
3. False

2 points

Question 4

1. The Mondale Company produces 20,000 units per year of a part that it needs for its final product. The total cost per unit of making this part is $30. Included in this cost are direct materials, $15; direct labor, $9; and manufacturing overhead (variable), $3. Similar parts are available on the market at prices ranging from $25 to $31. Assuming a sufficient supply of a part of similar quality, what is the maximum price Mondale should pay to buy the part rather than make it?
2. A.$26
3. B.$28
4. C.$30
5. D.$27

2 points

Question 5

1. In the contribution margin statement:
2. A.fixed costs are deducted to determine contribution margin.
3. B.fixed costs are deducted to determine gross margin.
4. C.variable selling costs are deducted to determine contribution margin.
5. D.All of the other answers are correct.

2 points

Question 6

1. When deciding to make or buy a product, the only relevant costs are differential costs.
2. True
3. False

2 points

Question 7

1. A foreign corporation has asked for bids on an order for 200,000 units of product X. Bravo Company is considering making a bid in order to use productively its idle capacity. Bravo is currently operating at 80% of its 1,000,000 unit total capacity. Bravo's variable costs are $50 per unit, while its fixed costs amount to $4,000,000. What is the minimum price Bravo should bid to the foreign corporation?
2. A.$120
3. B.just above $50
4. C.$80
5. D.$100

2 points

Question 8

1. Past costs incurred to create capacity are differential costs in future make or buy decisions.
2. True
3. False

2 points

Question 9

1. When differential analysis is applied to pricing decisions, the price selected should be the price that will result in the greatest TOTAL contribution margin.
2. True
3. False

2 points

Question 10

1. Sunk costs are:
2. A.irrelevant for decision making.
3. B.past costs.
4. C.costs such as the previous year's wages.
5. D.All of the other answers are correct.

2 points

Question 11

1. A differential cost:
2. A.is the same as a sunk cost.
3. B.includes past costs.
4. C.is equal to the difference in relevant costs between two alternatives.
5. D.All of the other answers are incorrect.

2 points

Question 12

1. The Sidney Company faces a make-or-buy decision concerning a part it manufactures in-house. The product can be manufactured internally with materials costs of $24 per unit, labor of $9, fixed overhead of $6.50, and variable overhead of $6. At what dollar amount would Sidney be indifferent to making or buying this part if the fixed overhead costs would be unaffected?
2. A.$24.00
3. B.$39.00
4. C.$33.00
5. D.$43.50

2 points

Question 13

1. Which of the following is true of the contribution margin income statement?
2. A.Selling costs are never included in the calculation of contribution margin.
3. B.The contribution margin is the amount that is available to cover fixed costs.
4. C.Both fixed and variable manufacturing costs are deducted to calculate contribution margin.
5. D.All of the other answers are incorrect.

2 points

Question 14

1. Differential analysis:
2. A.would be used to review past performance.
3. B.is an analysis of the different costs and benefits from alternative solutions to a problem.
4. C.is a procedure employing the gross margin to determine the best selling price.
5. D.compares two courses of action by determining net income for each.

2 points

Question 15

1. Discretionary fixed costs are subject to management control from year to year.
2. True
3. False

2 points

Question 16

1. The use of the master budget allows management to appraise new policies before they are put into effect.
2. True
3. False

2 points

Question 17

1. Zero-based budgeting requires that managers start budgeting at point zero.
2. True
3. False

2 points

Question 18

1. Periodic budget reports generally compare actual data with budgeted data.
2. True
3. False

2 points

Question 19

1. The projected income statement is typically:
2. A.not prepared.
3. B.prepared after the projected balance sheet.
4. C.prepared prior to the projected balance sheet.
5. D.All of the other answers are incorrect.

2 points

Question 20

1. The projected income statement is prepared after the projected balance sheet.
2. True
3. False

2 points

Question 21

1. Accounting data related to the past are often used in the preparation of budgets, which are plans for the future.
2. True
3. False

2 points

Question 22

1. Zero-based budgeting requires that managers start budgeting at point zero and:
2. A.budget only for changes from the past period's budget.
3. B.justify every dollar that will appear in the budget.
4. C.budget only for major items of expense.
5. D.All of the other answers are incorrect.

2 points

Question 23

1. Budgets are used in performance evaluation.
2. True
3. False

2 points

Question 24

1. Sales for next quarter are budgeted at 100,000 units. Finished goods inventory at the end of this quarter is 20,000 units. Planned production for next quarter is 140,000 units. What will be the budgeted finished goods inventory at the end of the next quarter?
2. A.20,000 units
3. B.50,000 units
4. C.60,000 units
5. D.40,000 units

2 points

Question 25

1. A series of budgets for differing levels of activity for the same item is called a(n):
2. A.master budget.
3. B.flexible budget.
4. C.operating budget.
5. D.financial budget.

2 points

Question 26

1. The Schraeger Company has estimated that sales for next quarter would be 30,000 units. The company has a beginning finished goods inventory of 2,000 units and wishes to have finished goods inventory of 5,000 units at the end of the quarter. How many units must the company produce in order to have its desired ending inventory?
2. A.33,000 units
3. B.37,000 units
4. C.30,000 units
5. D.27,000 units

2 points

Question 27

1. A cash budget is a plan indicating expected inflows and outflows of cash to aid in assessing short-term needs.
2. True
3. False

2 points

Question 28

1. The cornerstone of the budgeting process is the sales budget because:
2. A.the sales force must gather their budget's data from their customers.
3. B.all other budgets flow from the determination of future sales units and dollars.
4. C.information about future sales is the most readily available.
5. D.it is the most complex.

2 points

Question 29

1. Which of the following would be a factor to be considered in formulating a sales budget?
2. A.Economic indicators
3. B.The demand for the product
4. C.Level of advertising
5. D.All of the other answers are correct.

2 points

Question 30

1. Although budgets are plans for the future, they are based primarily on past experience adjusted for future expectations.
2. True
3. False