Acct Ch 7

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Author:
kppatel702
ID:
12620
Filename:
Acct Ch 7
Updated:
2010-03-31 04:42:00
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Managerial Accounting
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Description:
Exam II
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  1. Which of the following is often not a differential cost?

    A. Material
    B. Variable overhead
    C. Fixed overhead
    D. Labor
    C. Fixed overhead
    (this multiple choice question has been scrambled)
  2. Opporunity costs are

    A. Never incremental costs
    B. Always incremental costs
    C. Sometimes sunk costs
    D. Never avoidable costs
    B. Always incremental costs
    (this multiple choice question has been scrambled)
  3. Which of the following costs should not be taken into consideration when making a decision?

    A. Differential costs
    B. Relevant costs
    C. Opporunity costs
    D. Sunk costs
    D. Sunk costs
    (this multiple choice question has been scrambled)
  4. The joint costs incurred in a joint product situation

    A. Are incurred before the split off point
    B. Are incurred after the split off point
    C. Should only be allocated based on physical attributes
    D. Should never be allocated
    A. Are incurred before the split off point
    (this multiple choice question has been scrambled)
  5. Differential costs are sometimes referred to as ______________ costs
    relevant
  6. Which of the following costs should not be taken into consideration when making a decision?

    A. Relevant costs
    B. Opportunity costs
    C. Sunk costs
    D. Differential costs
    C. Sunk costs
    (this multiple choice question has been scrambled)
  7. Which of the following is often not a differential cost?

    A. Labor
    B. Fixed overhead
    C. Material
    D. Variable overhead
    B. Fixed overhead
    (this multiple choice question has been scrambled)
  8. Fixed costs are never incremental costs.

    True or False
    False
  9. Which of the following is not relevant when considering whether or not to drop a product?

    A. The potential impact on demand for other products
    B. The contribution margin
    C. Qualitative factors
    D. Allocated common costs
    D. Allocated common costs
    (this multiple choice question has been scrambled)
  10. Opportunity costs are

    A. Always incremental costs
    B. Sometimes sunk costs
    C. Never incremental costs
    D. None of the above
    A. Always incremental costs
    (this multiple choice question has been scrambled)
  11. The joint costs incurred in a joint product situation

    A. Are incurred before the split off point
    B. Are incurred after the split off point
    C. Should be allocated based on physical attributes only
    D. None of the above
    A. Are incurred before the split off point
    (this multiple choice question has been scrambled)
  12. A joint products cost is $18, which includes $6 of allocated joint cost. Its sales price is $16. In this case

    A. The company should sell as few of the items as possible to minimize the loss on sales
    B. Profit will improve if the company discontinues production of the product
    C. The data are misleading because the $6 allocated joint cost will be incurred even if the product is discontinued
    D. Both a and b are correct
    C. The data are misleading because the $6 allocated joint cost will be incurred even if the product is discontinued
    (this multiple choice question has been scrambled)
  13. According to the Theory of Constraints, optimizing use of a constraint requires

    A. Production of the product with the highest profit per unit
    B. Production of the product with the highets contribution margin
    C. Production of the product with the highest contribution margin per unit of the constrained resource
    D. Production of the product with the shortest production time
    C. Production of the product with the highest contribution margin per unit of the constrained resource
    (this multiple choice question has been scrambled)
  14. Generally, parts should be inspected prior to being sent to a department that is a bottleneck.

    True or False
    True
  15. What are differential costs and revenues?
    Differential costs and differential revenues are costs and revenues that differ between decision alternatives
  16. What is the proper approach to analyzing whether a product line should be dropped?
    To calculate the change in income that will result from dropping the product line. If income would increases then it should be dropped
  17. Give an example of a fixed cost that is not sunk but still irrelevant.
    Common costs which are incurred for the benefit of two or more products, such as the company president's salary, are not sunk because they are incurred in current and future periods. But they are still irrelevant because they usually do not differ among the decision alternatives.
  18. Why is the relative sales value a more logical basis for allocating joint costs than physical quantity?
    The amount of joint cost allocated to a product under relative sales value method cannot exceed the product's sales value at the split-off point. Thus, products that make a positive contribution to covering joint cost will not look unprofitable.
  19. Why are batch sizes generally larger in bottleneck departments?
    The value of time in a bottleneck department is generally quite high and equal to the contribution margin of all throughput per hour. Therefore, you don’t want to “waste it” setting up equipment. Since more setups are required with small batch sizes, it is generally advisable to have larger batch sizes in bottleneck departments.
  20. Why is a bottleneck department referred to as a drum in the Theory of Constraints?
    A bottleneck department is referred to as a drum because it “beats a rhythm” that coordinates the production in other departments.
  21. Formula: Relative sales value method, Joint cost allocated to product A
    (Sales value of A/ Total Sales value) x Joint Cost
  22. Formula: Physical quantity method, cost allocated to A
    (Physical measure of A/Total Physical Measure) x Joint cost

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