1. PH Toy is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $36 and PH Toy would sell it for $78. The cost to assemble the product is $25 p

1. PH Toy is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $36 and PH Toy would sell it for $78. The cost to assemble the product is $25 per unit and PH Toy believes the market would support a price of $102 on the assembled unit. What decision should PH Toy Company make? (Points : 3)

A) Sell before assembly, the company will be better off by $1 per unit.

B) Sell before assembly, the company will be better off by $24 per unit.

C) Process further, the company will be better off by $35 per unit.

D) Process further, the company will be better off by $17 per unit.

2. Which of the following is not a benefit of budgeting? (Points : 3)

A) It promotes efficiency.

B)It deters waste.

C)It is a basis for performance evaluation.

D) It assures the company that management will perform at a particular operating level.

3. The transfer price approach that conceptually should work the best is the (Points : 3)

A) cost-based approach

B) market-based approach

C) negotiated price approach

D) time and material pricing approach.

4. Which statement is true of an opportunity cost? (Points : 3)

A) It is the cost of a special order option.

B) It is always variable.

C) It is the potential benefit as a result of following an alternative course of action.

D) It is a sunk cost.

5. Hermantic Inc. can produce 100 units of a component part with the following costs:

Direct Materials $45,000

Direct Labor $20,000

Variable Overhead $48,000

Fixed Overhead $33,000

If Hermantic, Inc. purchases the components externally for $120,000, by what amount will its total costs change if none of the fixed overhead is avoidable?

(Points : 3)

A) An increase of $120,000

B) An increase of $26,000

C) An increase of $7,000

D) A decrease of $33,000

6. The cost-plus pricing approach’s major advantage is (Points : 3)

A) it considers customer demand.

B) that sales volume has no effect on per unit costs.

C) it is simple to compute.

D) it can be used to determine a product’s target cost.

7. Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75. Fixed costs were $80,000 when 10,000 units were produced and sold. The company has a one-time opportuity to sell an additional 2,000 units at $55 each in an international market which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? (Points : 3)

A) $84,000

B) $40,000

C) $26,000

D) $10,000

8. Which of the following scenarios would make a manager indifferent about selling a product at the split-off point or processing it further? (Points : 3)

A) When incremental revenues > incremental costs.

B) When incremental revenues < incremental costs. C) When incremental revenues = incremental costs. D) When incremental revenues > joint costs.

9. Which of the following will make the most effective environment for budget acceptance? (Points : 3)

A) The budget is prepared by top management.

B) The budget preparation contains input from all levels of management.

C) The budget is prepared by department heads.

D) Acceptance has nothing to do with who prepares budgets.

10. The maximum transfer price from the buying division’s standpoint is the (Points : 3)

A) total cost + opportunity cost

B) variable cost + opportunity cost.

C) external purchase price.

D) external purchase price + oppportunity cost.

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