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Multiple Choice



This activity contains 10 questions.

Question 1.
When using the five-step decision model, which one of the following steps should be done last?


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Question 2.
The following steps are included in the five-step decision process:
1. Evaluation of performance
2. Obtain information
3. Implement decision
4. Predict future costs
5. Select alternative
In what order should these steps be completed?


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Question 3.
A relevant revenue is a revenue that is a(n)


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Question 4.

TRI-IT is looking at replacing a current machine with a newer model. The following information has been collected by the managers.

  COST
OLD MACHINE NEW MACHINE
Direct materials $40,000 $50,000
Direct labor 30,000 30,000
Variable overhead 15,00012,000
Supervisor's salary 45,000 45,000

Which of the costs are relevant in the decision as to whether the new machine should be acquired?


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Question 5.
An example of a qualitative factor is


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Question 6.

Julia Garden Supply is considering accepting a special order from a foreign firm for Be-gone, the main product it produces. This would be a one-time order, would not impact existing sales, and sufficient capacity exists to manufacture the goods. Existing cost information is as follows:

Item Cost per unit
Direct materials $6.00
Direct labor 7.50
Variable manufacturing overhead 3.25
Fixed manufacturing overhead (allocated) 4.50
Variable marketing 2.25

The fixed manufacturing costs will remain unchanged if the order is accepted or not. The foreign purchaser is willing to pay $22 for each unit and would like to purchase 5,000 units. Because the sales would not go through regular distribution channels, the variable marketing costs would not be incurred. However, a packing and shipping cost of $1.00 per unit would be incurred to get the units ready for overseas shipping. What is the relevant cost per unit that Julia's Garden Supply should use when considering whether or not to accept the special order?


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Question 7.

Julia's Garden Supply is considering accepting a special order from a foreign firm for Be-gone, the main product it produces. This would be a one-time order, would not impact existing sales, and sufficient capacity exists to manufacture the goods. Existing cost information is as follows:

Item Cost per unit
Direct materials $6.00
Direct labor 7.50
Variable manufacturing overhead 3.25
Fixed manufacturing overhead (allocated) 4.50
Variable marketing 2.25

The fixed manufacturing costs will remain unchanged if the order is accepted or not. The foreign purchaser is willing to pay $22 for each unit and would like to purchase 5,000 units. Because the sales would not go through regular distribution channels, the variable marketing costs would not be incurred. However, a packing and shipping cost of $1.00 per unit would be incurred to get the units ready for overseas shipping. What is the potential profit or loss that Julia's Garden Supply will make if it accepts the special order?


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Question 8.

POP produces three products that all use material A in their production. Information regarding the products and their costs are as follows (all information is per unit):

 Product 1Product 2Product 3
Selling price$200$400$500
Variable cost120280340
# of A's used per unit579

During the next period POP will only be able to obtain 5,000 units of material A. In what order should POP produce the products next period to maximize profit?


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Question 9.
The difference between the original cost of an asset and the accumulated depreciation is known as the


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Question 10.

Rev-it currently makes a component that it uses called Ver. An outside firm has offered to sell Rev-it the needed quantity of Ver for $20 per unit. Existing cost information on producing the 15,000 units of Ver is as follows:

Item Cost per unitTotal
Direct materials $6.00 $90,000
Direct labor 7.50112,500
Variable manufacturing overhead3.2548,750
Fixed manufacturing overhead4.5067,500

All variable costs and fixed manufacturing costs totaling $45,000 can be eliminated if the product is purchased. The remaining costs will not change even if Ver is purchased. There is no other use for the space that Ver currently occupies. What is the net advantage or disadvantage to the firm if Ver is purchased from the outside vendor?


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