MA 4 medio chiuso

Questions and Answers

What is the main purpose of using a contribution margin approach in decision-making?

To determine the unit product cost for a part

To identify relevant fixed costs for decision-making (correct)

To allocate fixed costs accurately

To calculate the total operating profit loss for a segment

What can distort the decision to keep or drop a segment?

Variable overhead cost

Direct materials cost

Allocated fixed costs (correct)

Supervisor's salary

What is an advantage of vertical integration?

Increased dependence on suppliers

Potential economies of scale (correct)

Reduced production flexibility

Loss of control over essential activities

What should the decision to make or buy a part consider?

Financial advantage of making the part internally Signup and view all the answers

What should the decision to make or buy a part not be based solely on?

The cost comparison Signup and view all the answers

What is the unit product cost for the part based on?

Direct materials, direct labor, variable overhead, depreciation Signup and view all the answers

What type of decisions do sourcing decisions involve?

Choosing between internal production and external procurement Signup and view all the answers

Which of the following is a key factor in decision-making?

Identifying relevant costs and benefits Signup and view all the answers

What is the total machine-hours required for LongLife production?

$320,000$ machine-hours Signup and view all the answers

What is the main focus of decision-making?

Choosing from at least two alternatives Signup and view all the answers

Which costs are always irrelevant when choosing among alternatives?

Sunk costs Signup and view all the answers

What is crucial to consider when making decisions?

Opportunity costs Signup and view all the answers

What approach is the key to effective decision-making?

Differential cost approach Signup and view all the answers

What type of costs are irrelevant when they do not differ between alternatives?

Future costs Signup and view all the answers

When analyzing a special order, which costs and benefits are relevant?

Only the incremental costs and benefits Signup and view all the answers

What is the opportunity cost if the space to make Part 4A had an alternative use?

Equal to the segment margin that could have been derived from the best alternative use of the space Signup and view all the answers

In volume trade-off decisions, what should a company consider in order to maximize profits?

Select the product mix that maximizes the total contribution margin Signup and view all the answers

What is the constrained resource in Ensign Company's production?

Machine A1 Signup and view all the answers

What is the financial advantage of accepting the special order in the Jet Inc. scenario?

$6,000.00 Signup and view all the answers

What represents allocated costs common to all items produced in the factory and is irrelevant to the decision of making or buying part 4A?

Allocated general factory overhead Signup and view all the answers

What is the opportunity cost according to the text?

The benefit that is foregone as a result of pursuing some course of action Signup and view all the answers

What is a special order in the context of the text?

A one-time order that is not considered part of the company’s normal ongoing business Signup and view all the answers

What is the machine or process that is limiting overall output called?

The bottleneck Signup and view all the answers

What is the formula to calculate the activity rate for the indirect factory wages at Baxter Battery?

$ ext{Activity rate} = rac{ ext{Total cost of indirect factory wages}}{ ext{Total activity level}}$ Signup and view all the answers

What is the total activity level for factory equipment depreciation at Baxter Battery?

800,000 machine-hours Signup and view all the answers

How are organization-sustaining costs treated in activity-based costing?

They are not assigned to products or customers Signup and view all the answers

What is the formula to calculate the individual activity rate for design changes at Baxter Battery?

$ ext{Activity rate} = rac{ ext{Total cost of design changes}}{ ext{Total activity level}}$ Signup and view all the answers

What is the total cost of indirect factory wages consumed by customer orders at Baxter Battery?

$ ext{Total cost} = 30 ext{% of }$1,800,000 Signup and view all the answers

What is the total cost of factory equipment depreciation consumed by customer orders at Baxter Battery?

$ ext{Total cost} = 20 ext{% of }$700,000 Signup and view all the answers

What is the purpose of assigning costs to a cost object using a second-stage allocation in activity-based costing?

To assign overhead costs to products or customers Signup and view all the answers

Study Notes

Key Concepts in Decision-Making and Differential Analysis

400,000 batteries ordered with 6,000 separate orders
SureStart requires 36 minutes of machine time for a total of 480,000 machine-hours
4,000 custom designs prepared
LongLife requires 48 minutes of machine time for a total of 320,000 machine-hours
Decision-making involves choosing from at least two alternatives
Identifying relevant costs and benefits is crucial in decision-making
The key to effective decision-making is differential analysis
Sunk costs are always irrelevant when choosing among alternatives
Future costs and benefits that do not differ between alternatives are irrelevant
Opportunity costs need to be considered when making decisions
Identifying relevant costs using an example of Cynthia's decision to drive or take the train
Total cost approach versus differential cost approach in decision-making

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Description

Test your understanding of decision-making and differential analysis with this quiz. Explore key concepts such as relevant costs, sunk costs, opportunity costs, and the role of differential analysis in effective decision-making. Dive into scenarios and examples to grasp the total cost approach versus the differential cost approach.