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Exam 30: Cost-Revenue Analysis for Decision Making

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Question 31

True/False

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Net income under variable costing will differ from reported net income under absorption costing when finished good inventory levels change.

A) True
B) False

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Question 32

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Evaluation of available capacity is irrelevant when making decisions on whether to accept or reject a special order.

A) True
B) False

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Question 33

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If a decision must be made to close a warehouse,non-refundable prepaid rent on the warehouse is

A segment of a business probably should be discontinued if it cannot produce a(n)___________________.

Which is the final step in the decision-making process?

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

Which of the following is NOT a step in the decision-making process?

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

McAdd Industries is considering whether to continue making part MPG 411 or buying the part from a supplier.The supplier can sell the needed number of parts (47,000 projected)to McAdd for an amount that is above the company's current cost to manufacture it.If McAdd decides to purchase the parts from its supplier,it will be able to reconfigure the manufacturing floor in order to allow increased production of 50 of its product for an increased contribution margin of $17,000 for the year.The old machine has a book value of $39,000,and can be sold for $4,000. Discuss this situation.What are the considerations?

Which of the following should NOT be a consideration when deciding whether to make or buy a part?

Irrelevant costs are those that will not impact the decision maker's options and thus can be eliminated from analyses.

When inventories increase,the direct costing income statement will report lower net income than reported under absorption costing.

In its first year of operations,a company has sales of $100,000,ending finished goods inventory of $9,000,variable manufacturing costs of $50,000,and fixed manufacturing costs of $28,000 for the year.Assuming the company uses direct costing,the manufacturing margin for the year is

In its first year of operations,a company has sales of $100,000,ending finished goods inventory of $9,000,variable manufacturing costs of $50,000,and fixed manufacturing costs of $28,000 for the year.Assuming the company uses direct costing,the cost of goods sold for the year is

A cost that does not change regardless of the option selected need not be considered in the decision-making process.

Timkon Manufacturing has provided the following operating results for its recent operations: Assuming beginning inventory cost per unit is not different than ending inventory cost,the value of the ending inventory under direct costing is:

Which inventory costing system is required by GAAP for financial reporting purposes?

Which of the following is NOT a consideration regarding a special order?

The first step in the decision-making process is to determine relevant cost and revenue data.

Earnings or potential benefits foregone because a certain course of action is taken are called ____________________ costs.