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Exam 30: Cost-Revenue Analysis for Decision Making

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Question 1

True/False

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Generally Accepted Accounting Principles require the use of direct costing for financial reporting purposes.

A) True
B) False

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False

Question 2

Multiple Choice

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Timkon Manufacturing has provided the following operating results for its recent operations: Using the direct method,cost of goods manufactured for the year is:

A) $200,000
B) $230,000
C) $300,000
D) $330,000

E) None of the above
F) All of the above

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Question 3

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Costs that are not directly traceable to any specific department are called ____________________ costs.

If the finished goods inventory decreases during the period,the reported net income will be larger under variable costing than under absorption costing.

The difference in cost between one alternative and another is called a(n)____________________ cost.

Segment managers can never control fixed costs.

Green Manufacturing makes 30,000 units per year of a part used in the manufacture of its new camcorder.An outside supplier has offered to sell Green all of these parts for $48 a unit.If the parts were purchased from the supplier,all of the direct labor costs would be avoided as well as $5 of manufacturing overhead costs per unit.Product cost information for the part under review follows: How much of the unit product cost is relevant in the decision of whether to make or buy the part?

In deciding whether to manufacture or to purchase a product,____________________ costs are generally ignored.

Which of the following is not true of the direct costing procedure?

Using the given information,determine the income under both the absorption and the direct (variable)costing methods for CRL Company this year.Explain the difference,if any.

The profitability of a segment is judged by its contribution margin.

If a segment of a business is expected to produce an annual contribution margin of $30,000 but is also expected to incur controllable fixed costs of about $40,000 annually,that segment should probably be discontinued.

The difference between revenue and variable costs is referred to as the ___________________.

Using the absorption method,cost of goods manufactured for the year is:

The following information relates to the purchase of new machine being considered. The new machine would enable the company to make 13,500 units per year.The current capacity of 12,000 is based on the maximum number of units that the old machine can produce.The company has had to turn down orders in the past few years due to this limit on capacity and estimates that it can sell as many of the product as it can produce.The sales price per unit of the product is $34.50.Determine the relevant data.Pose one addition consideration regarding this decision.

The sum of unit variable and fixed costs are used as a basis for determining whether to accept or reject a special order.

If a decision must be made to replace a machine,the book value of the existing machine is a sunk cost.

Under absorption costing,a portion of the fixed manufacturing overhead is deferred to future periods as part of the inventory value.

Using direct costing,the manufacturing margin is:

On an income statement prepared with a direct costing approach,the excess of sales over the cost of goods sold,based on variable costs only,is referred to as