Reference no: EM132547213

Question 1: Differential analysis requires the identification of all revenues and costs that differ from one alternative to another. In general, managers select the alternative that:

a. Result in the lowest profit or lowest cost

b. Results in the highest profit or highest cost

c. Results in the highest profit or lowest cost

d. Results in the lowest profit or highest cost

Question 2: For purposes of differential analysis, what is a special order?

a. An order that comes unexpectedly from a new customer without any sales expenses

b. An order which sets a new record for the company in terms of either volume or profit brought in.

c. An unique, one-time order requested by a customer, at a cost which is usually below the normal pricing structure.

d. An order taken at year's end that is billed in the fiscal year that is ending but which is delivered in the new fiscal year.

Question 3: For which of the following decisions should management accountants use differential analysis?

a. To determine whether to make or buy products, keep or drop product lines, keep or drop customers, and accept or reject special customer orders.

b. To decide when to add work shifts and to expand marketing reach into new and untested markets with new and untested products.

c. To build new facilities or renovate the existing plant and equipment

d. To hire new employees, to identify employees' appropriate level of training, and to determine promotions and pay of senior management.

Question 4: Given the following list of costs, which one should be ignored in a decision to produce additional units of product for a factory that is operating at less than 100% capacity, and the additional business will not use up the remainder of the plant capacity?

a. Variable factory overhead

b. Fixed administrative expenses

c. Variable selling expenses

d. Per hour cost of direct labor

Question 5: Henny-Penny has 8,000 defective units of a product that cost $3 per unit to manufacture, and can be sold for $1 per unit. These units can be reworked for $3 per unit and sold for a full price of $5 each. Should Henny-Penny rework the defective units, how much incremental net result will result?

a. $16,000

b. $24,000

c. $(8,000)

d.$8,000

Question 6: Henny-Penny has 8,000 defective units of a product that cost $4 per unit to manufacture, and can be sold for $2 per unit. These units can be reworked for $1 per unit and sold for full price of $6 each. If Henny-Penny rework the defective units, how much net return will result?

a. $8,000

b. $(24,000)

c. $48,000

d.$24,000

Question 7: If a make-or-buy decision is based on product costs, what is the impact on sales revenue in the analysis?

a. If you include sales revenue it will skew the results

b. Sales revenue always has ti be included in the analysis

c. It is not necessary to include sales revenue in the analysis as including it will not affect the outcome

d. You cannot have an analysis without revenue included

Question 8: The cost of a new machine is $24,000. The machine has a 5-year service life and no salvage. The annual cash flow will be 15% of the cost of the machine. The payback will occur:

a. in 15 years

b. in 6.7 years

c. in 1.5 years

d. after the machine's service life has expired

Question 9: What are allocated fixed costs?

a. They are also referred to as uncommon fixed costs

b. Costs that can be directly traced to a product line using and industry standard allocation process

c. A budget cost based on allocated fixed costs over total production costs

d. Costs that cannot be traced directly to a product line, and therefore are assigned product lines using an allocation process.

Question 10: What is a segmented income statement and how is one used?

a. segmented income statement is a pro forma income statement for the upcoming year, in which cost items are segmented by product lines, and is used by management to evaluate future profitability.

b. A segmented income statement is an income statement for the past year, in which production items are separated by product lines, and is used by management to evaluate a specific product line.

c. A segmented income statement is an estimated revenue statement, in which production items are separated by product lines, and is used by management to evaluate production goals.

d. A segmented income statement is an income statement for the past year, in which cost items are separated by fixed and variable classification, and is used by management to evaluate production quantities.