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Chapter 14-1a

Acct 202

Select the best answer.

1. When it comes to decision making, a managerial accountant is chiefly responsible for the: 
A) collection of data so that a decision can be made. 
B) clarification of the decision problem. 
C) selection of an alternative. 
D) choice of a decision model. 
E) identification of alternatives. 

2. Which of the following costs can be ignored when making a decision?                   

A) Opportunity costs.

B) Differential costs.

C) Sunk costs.

D) Relevant costs.

E) All future costs.

3. The book value of equipment is an example of a(n):

A) future cost.

B) differential cost.

C) comparative cost.

D) opportunity cost.

E) sunk cost.

4. A factory that makes a part has significant idle capacity. The factory's opportunity cost of making this part is equal to:

A) The variable manufacturing cost per unit.

B) the fixed manufacturing cost per unit.

C) the semivariable cost per unit.

D) the total manufacturing cost per unit.

E) zero.

5. A special order generally should be accepted if: 

A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order. 
B) excess capacity exists and the revenue exceeds all variable costs associated with the order. 
C) excess capacity exists and the revenue exceeds allocated fixed costs. 
D) the opportunity costs resulting from the special order are less than the variable costs associated with the special order. 
E) the revenue exceeds variable costs, regardless of available capacity. 

6. Two months ago, Victory purchased 4,500 pounds of Hydrol, paying $15,300. The market for this product has been very strong since the acquisition, with the market price jumping to $4.05 per pound. (Victory can buy or sell Hydrol at this price.) The company recently received a special-order inquiry, one that would require the use of 4,200 pounds of Hydrol. Which of the following is (are) relevant in deciding whether to accept the special order? 

A) The 300-pound remaining inventory of Hydrol. 
B) The $4.05 market price. 
C) The $3.40 purchase price. 
D) 4,500 pounds of Hydrol. 
E) More than one of the above factors are relevant. 

Use the following for questions 7 & 8:

HiTech manufactures two products: cassette players and compact disc players. The results of operations for 199x follow.


Cassette Players

Compact Disc Players 










Less: Cost of Goods Sold




Gross Margin




Less: Selling expenses




Operating income

$ -------



Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for the cassette players and $20 per unit for the compact disc players. Variable selling expenses are $4 per unit for the cassette players and $20 per unit for the compact disc players; remaining selling amounts are fixed. 


7. HiTech wants to drop the line of cassette players. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if the cassette players are discontinued? 

A) $0. 
B) $10,400 increase. 
C) $20,000 increase. 
D) $39,600 decrease. 
E) None of the above. 

8. Disregard the information presented in question no. 7. If HiTech eliminates the line of cassette players and uses the available capacity to produce and sell an additional 1,500 compact disc players, what would be the impact on operating income? 

A) $28,000 increase 
B) $45,000 increase 
C) $55,000 increase 
D) $85,000 increase 
E) None of the above. 

9. Product costs incurred after the split-off point in a joint processing environment are termed: 

A) separable processing costs. 
B) joint product costs. 
C) by-product costs. 
D) scrap costs. 
E) spoilage costs. 

10. A firm that decides to emphasize those goods with the highest contribution margin per unit may have made an incorrect decision when the company: 

A) is highly automated. 
B) has excess capacity. 
C) has capacity constraints in the form of limited resources. 
D) has a high fixed-cost structure. 
E) has a high level of sunk costs.


1. A

2. C

3. E

4. A

5. B

6. B

7. D

8. C

9. A

10. C

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