ACCT 241 Week 12 Assignment Help 2

ACCT 241 Week 12 Assignment Help 2 | American University 

1.

Required information

We will learn to identify relevant costs and benefits. Costs and benefits that differ between the alternatives are relevant. All costs and benefits that do not differ are irrelevant. Costs that can be avoided are called avoidable costs. If they cannot be avoided, they are called unavoidable costs, which are ignored for decision making. A sunk cost is a cost that has already been incurred and cannot be avoided regardless of the decision. We will also cover why a differential approach to decision making is preferred.

Knowledge Check 01

Which of the following is the second concept used in business decision making?

 Identify opportunity costs.

Perform differential analysis.

Distinguish between relevant and irrelevant costs and benefits.

Define the alternatives.

2.

Required information

We will learn to identify relevant costs and benefits. Costs and benefits that differ between the alternatives are relevant. All costs and benefits that do not differ are irrelevant. Costs that can be avoided are called avoidable costs. If they cannot be avoided, they are called unavoidable costs, which are ignored for decision making. A sunk cost is a cost that has already been incurred and cannot be avoided regardless of the decision. We will also cover why a differential approach to decision making is preferred.

Knowledge Check 01

Costs that have been incurred and cannot be eliminated regardless of the alternative chosen are ________.

sunk costs

unavoidable costs

relevant costs

irrelevant costs

3.

Required information

We will learn to identify relevant costs and benefits. Costs and benefits that differ between the alternatives are relevant. All costs and benefits that do not differ are irrelevant. Costs that can be avoided are called avoidable costs. If they cannot be avoided, they are called unavoidable costs, which are ignored for decision making. A sunk cost is a cost that has already been incurred and cannot be avoided regardless of the decision. We will also cover why a differential approach to decision making is preferred.

Knowledge Check 01

High Roller Inc. is trying to decide whether to buy a private jet or to lease one. The finder's fee is incurred only if the private jet is bought. The finder's fee is what type of cost for this decision?

Sunk cost

Unavoidable cost

Relevant cost

Irrelevant cost

4.

Required information

We will learn to identify relevant costs and benefits. Costs and benefits that differ between the alternatives are relevant. All costs and benefits that do not differ are irrelevant. Costs that can be avoided are called avoidable costs. If they cannot be avoided, they are called unavoidable costs, which are ignored for decision making. A sunk cost is a cost that has already been incurred and cannot be avoided regardless of the decision. We will also cover why a differential approach to decision making is preferred.

Knowledge Check 01

When analyzing two alternatives which is NOT true?

Isolating relevant costs gives a different answer than using all costs.

Isolating relevant costs is called the differential cost approach.

Mingling irrelevant costs with relevant costs may cause confusion and distract attention from the information that is critical.

5.

Required information

We will prepare an analysis to help us decide the profitability of a product line or a business segment. The decision to add or drop a product line or a business segment is influenced by many qualitative and quantitative factors. The impact of the decision on the net operating income is of primary importance. A product line or segment that appears to be unprofitable might actually be profitable. We will learn that these product lines or segments look unprofitable because they are distorted by the presence of common fixed costs.

Knowledge Check 01

Match the term and the definition.

6

Required information

We will prepare an analysis to help us decide the profitability of a product line or a business segment. The decision to add or drop a product line or a business segment is influenced by many qualitative and quantitative factors. The impact of the decision on the net operating income is of primary importance. A product line or segment that appears to be unprofitable might actually be profitable. We will learn that these product lines or segments look unprofitable because they are distorted by the presence of common fixed costs.

Knowledge Check 01

A company has three product lines, one of which reflects the following results:

If this product line is eliminated, 60% of the fixed expenses are traceable fixed expenses, which can be eliminated and the other 40% are common fixed expenses that cannot be avoided.  If management decides to eliminate this product line, the company's net income will ________.

increase by $50,000

decrease by $90,000

 decrease by $6,000             

                increase by $6,000

7.

Required information

We will discuss the strategic importance of make or buy decisions. We will also learn to prepare a make or buy analysis considering the impact of opportunity costs. Opportunity costs represent economic benefits that are forgone as a result of pursuing some course of action.

Knowledge Check 01

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service is called ________.

opportunity cost

vertical integration

relevant cost

avoidable cost

8

Required information

We will discuss the strategic importance of make or buy decisions. We will also learn to prepare a make or buy analysis considering the impact of opportunity costs. Opportunity costs represent economic benefits that are forgone as a result of pursuing some course of action.

Knowledge Check 01

Nakatomi Corporation produces 10,000 units of Product A at a cost of $20 per unit. A detailed breakup of the cost is below. Choose the correct answer from the options provided.

What are the total relevant cost of producing the units internally?

  $150,000

  $120,000

$200,000

$170,000

9.

Required information

We will discuss the strategic importance of make or buy decisions. We will also learn to prepare a make or buy analysis considering the impact of opportunity costs. Opportunity costs represent economic benefits that are forgone as a result of pursuing some course of action.

Knowledge Check 01

The potential benefit that is given up when one alternative is selected over another is called ________.

relevant cost

avoidable cost

differential cost

opportunity cost

10.

Required information

We will discuss the preparation of an analysis of incremental revenues and costs. This analysis helps in deciding whether a special order should be accepted or not. In general, a special order is profitable if the incremental revenue from the special order exceeds the incremental costs of the order.

Knowledge Check 01

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

Make or buy

Special order

Sell or process further

Keep or drop

11.

Required information

We will discuss the preparation of an analysis of incremental revenues and costs. This analysis helps in deciding whether a special order should be accepted or not. In general, a special order is profitable if the incremental revenue from the special order exceeds the incremental costs of the order.

Knowledge Check 01

Prairie, Inc. produces a single product. It has an annual capacity of 10,000 units, but currently uses only 80% of it. Each unit is sold for $50 and requires direct material worth $30 and direct labor worth $5. Manufacturing overhead cost is $10 per unit of which 70% is variable. What is Prairie's total incremental cost incurred to produce each unit?

 $30

$42

$35

$45

12.

Required information

We will learn to determine the most profitable use of a constrained resource. We will also discuss that products with a higher contribution margin per unit of the constrained resource should be favored if some products must be cut back because of a constraint.

Knowledge Check 01

When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to ________.

keep or drop decisions

volume trade-off decisions

sell or process further decisions

make or buy decisions

13.

Required information

We will learn to determine the most profitable use of a constrained resource. We will also discuss that products with a higher contribution margin per unit of the constrained resource should be favored if some products must be cut back because of a constraint.

Knowledge Check 01

Roberto, Inc. manufactures products A and B. Both products have a contribution margin ratio of 40%. What is the contribution margin per unit of the constrained resource for product B, if labor time is the constrained resource?

$2 per minute

$3 per minute

$6 per minute

$8 per minute

14.

Required information

We will learn to determine the most profitable use of a constrained resource. We will also discuss that products with a higher contribution margin per unit of the constrained resource should be favored if some products must be cut back because of a constraint.

Knowledge Check 01

Roberto, Inc. manufactures products A and B. Both products have a contribution margin ratio of 40%. Assume that labor time is the constrained resource and only a total of 3,000 minutes is available. Product A has a total demand of 500 units and product B has a total demand for 600 units. Considering the constraint, how many units of product B should be produced to maximize profits?

500 units

450 units

550 units

600 units

15.

Required information

We will learn how to quantify the benefits of relaxing a constraint. We will understand why managers should focus much of their attention on managing the bottleneck. We will also look at various ways of relaxing the constraint.

Knowledge Check 01

Which of the following does NOT describe a manager increasing the capacity of the bottleneck?

Relaxing the constraint

Tightening the constraint

Elevating the constraint

16.

Required information

We will learn to prepare an analysis to identify whether a product should be sold at the split-off point or should be processed further. It is profitable to continue processing a joint product after the split-off point so long as the incremental revenue from such processing exceeds the incremental processing cost incurred after the split-off point. We will also understand that the joint costs incurred up until the split-off point do not affect such decisions.

Knowledge Check 01

All of the following are relevant to the sell or process further decision except _______.

costs incurred beyond the split-off point

revenues at the split-off point

joint costs incurred before the split-off point

revenues beyond the split-off point

17.

Required information

We will learn to prepare an analysis to identify whether a product should be sold at the split-off point or should be processed further. It is profitable to continue processing a joint product after the split-off point so long as the incremental revenue from such processing exceeds the incremental processing cost incurred after the split-off point. We will also understand that the joint costs incurred up until the split-off point do not affect such decisions.

Knowledge Check 01

Superware, Inc. produces multiple products out of a common input. Geratin is one such product, which has a sales value of $15,000 at the split-off point. Joint costs allocated to Geratin are $12,000. Sales value of Geratin increases to $25,000 after further processing, and this processing will cost $7,000. What is the net profit or loss if Super ware processes the product further?

($3,000) loss

$3,000 profit

$20,000 profit

$18,000 profit