1. The cost of a computer system installed last year is an example of: (Points: 2)
a sunk cost
a relevant cost
a differential cost
an avoidable cost
2. In evaluating different alternatives, it is useful to concentrate on: (Points: 2)
variable costs
fixed costs
total costs
relevant costs
3. Relevant costs in a make-or-buy decision of a part include: (Points: 2)
setup overhead costs for the manufacture of the product using the outsourced part
currently used manufacturing capacity that has alternative uses when part is outsourced
annual plant insurance costs that will remain the same
corporate office costs that will be allocated differently
4. The following information applies to Questions 7 and 8.
Jim's 5-year-old Geo Prizm requires repairs estimated at $3,000 to make it roadworthy again. His friend, Julie, suggested that he should buy a 5-year-old used Honda Civic instead for $3,000 cash. Julie estimated the following costs for the two cars:
Geo Prizm Honda Civic
Acquisition cost $15,000 $3,000
Repairs $ 3,000 ---
Annual operating costs
(Gas, maintenance, insurance)
$ 2,280 $2,100
The cost(s) NOT relevant for this decision is(are): (Points: 2)
the acquisition cost of the Geo Prizm
the acquisition cost of the Honda Civic
the repairs to the Geo Prizm
the annual operating costs of the Honda Civic
5. Employee morale at Dos Santos, Inc., is very high. This type of information is known as: (Points: 2)
a qualitative factor
a quantitative factor
a differential factor
an opportunity cost
6. Characteristics of a product layout include: (Points: 2)
raw materials and purchased parts are delivered directly to the production line where they are needed
low-volume production
a U-shaped layout
small batches of unique products
7.
The following information applies to Questions 14 and 15.
Skate Magic manufactures three different product lines, Model TS, Model AY, and Model GG. Considerable market demand exists for all models. The following per unit data apply:
Model TS Model AY Model GG
Selling price $100 $120 $140
Direct materials 12 12 12
Direct labor ($12 per hour) 24 24 48
Variable support costs ($4 per machine-hour) 8 16 16
Fixed support costs 20 20 20
Which model has the greatest contribution margin per unit? (Points: 2)
Model TS
Model AY
Model GG
both Models TS and AY

Model TS 100-12-24-8= 56

Model AY 120-12-24-16=68*

Model GG 140-12-48-16=64


8. Characteristics of just-in-time manufacturing include all of the following except: (Points: 2)
the ability to process items in large batches
making a product only when the customer requires it
no work-in-process inventories
a problem anywhere can stop production
9. Costs that cannot be changed by any decision made now or in the future are: (Points: 2)
fixed costs
indirect costs
avoidable costs
sunk costs
10. When deciding to lease a new cutting machine or continue using the old machine, the following costs are all relevant EXCEPT the: (Points: 2)
$50,000 cost of the old machine
$20,000 cost of the new machine
$10,000 selling price of the old machine
$3,000 annual savings in operating costs if the new machine is purchased
11. Relevant costs of a make-or-buy decision include all EXCEPT: (Points: 2)
fixed salaries that will not be incurred if the part is outsourced
current direct material costs of the part
special machinery for the part that has no resale value
material-handling costs that can be eliminated
12. Which of the following would NOT be considered in a make-or-buy decision? (Points: 2)
capacity-related costs that will no longer be incurred
flexible costs of production
potential rental income from space occupied by the production area
unchanged supervisory costs
13. Relevant costs in a make-or-buy decision of a part include: (Points: 2)
setup overhead for the manufacture of the product using the outsourced part
currently used manufacturing capacity that has alternative uses
annual plant insurance costs that will remain the same
corporate office costs that will be allocated differently
14. When deciding to accept a one-time-only special order from a wholesaler, management should do all of the following EXCEPT: (Points: 2)
analyze product costs
consider the impact of the special order on future prices of their products
determine whether excess capacity is available
verify past design costs for the product
15. When deciding whether to discontinue a segment of a business, managers should focus on: (Points: 2)
equipment used by the segment that could become idle
reallocation of corporate costs
how total costs differ among alternatives
operating income per unit of the discontinued segment
16. In ______, equipment is organized to accommodate the production of a specific product. (Points: 2)
a process layout
a product layout
cellular manufacturing
just-in-time production
17. Characteristics of a product layout include: (Points: 2)
raw materials and purchased parts are delivered directly to the production line where they are needed
low-volume production
a U-shaped layout
small batches of unique products
18. In ______, the plant is organized into areas where all machines used to manufacture a group of similar products are close to each other. (Points: 2)
a process layout
a product layout
cellular manufacturing
just-in-time production
19. ______are incurred when a defective component is discovered before shipment to the customer. (Points: 2)
Prevention costs
Appraisal costs
Internal failure costs
External failure costs
20. ______include the cost of raw-materials inspections and assembly-line inspections. (Points: 2)
Prevention costs
Appraisal costs
Internal failure costs
External failure costs