Chapter 8: Relevant information and different making

Câu Hỏi 1

Panther Ltd is an international business. The CEO has noticed that the Australian division
is running at a loss consistently. The following analysis shows the budgeted financial
performance of the division for the next year:
Sales $1,600,000
Costs ($1,950,000)
Loss ($350,000)
Notes concerning the “Costs” figure:

● Included is an increase in the bad debt provision for the year of $100,000
● Costs include an impairment charge of £50,000 on a vehicle owned by the
business
● Inside the costs figure for the division is £750,000 of fixed costs, 20% of these
are costs that have been allocated to the division by Panther Ltd, the other 80%
are specific to the division
● Costs do not include the expected loss on the disposal of a building of approx.
£90,000

If Panther Ltd was to shut down this division, what would the relevant net benefit be for
this year, assuming that redundancies for labour in this division will cost £120,000?
a.All are incorrect
b.$80,000
c.$170,000
d.$350,000
e.There isn’t a relevant net benefit to shutting down this division

Câu Hỏi 2

From the options below, select the appropriate description of a by-product.

a.A product which has a high sales value at the split-off point
b.Leather when slaughtering a cow
c.Beef when slaughtering a cow
d.All are correct
e.A product where the costs are not apportioned to it on completion of the process
Câu Hỏi 3

ABC Ltd manufactures three products from a single machine, which is in limited supply.
Product details for the current period are as follows:

The planned production optimizes the use of 8,100 machine hours that are available
within this period. However, another company has been found which can outsource
another 2,000 machine hours to ABC Ltd.
What would be the maximum price that ABC Ltd should be prepared to pay for the
additional 2,000 machine hours? £Trả lời .

Câu Hỏi 4

S Co. is calculating the relevant cost of the material to be used on a particular contract.
The contract requires 2,400 kgs of material A and this can be bought for $5.20 per kg.
S Co. bought 8,000 kgs of material A some time ago when it paid $4.10 per kg. Currently
2,100 kgs of this remains in stock.
The stock of material A could be sold for $3.80 per kg. S Co. has no other use for
material A other than on this contract, but it could modify it at a cost of $4.10 per kg and
use it as a substitute for material B. Material B is regularly used by the company and can
be bought for $6.80 per kg.
The relevant cost of the material for the contract is:
a.$3,320
b.$12,050
c.All are incorrect
d.$4,350
e.$7,230

Câu Hỏi 5

The cost to produce 8,000 units at 70% capacity is:

- Direct materials: $16,000
- Direct labour: $8,000
- Factory overhead, all fixed: $12,000
- Selling expense (40% variable, 60% fixed): $8,000
What unit price would the company have to charge to make $2,000 on a sale of 500
additional units that would be shipped out of the normal market area?
a.All are incorrect
b.$7.00
c.$8.90
d.$7.80
e.$7.40

Câu Hỏi 6

X Plc manufactures two types of baby car seats, normal and deluxe.
The selling price of a normal car seat is $100 per unit. It has a variable cost per unit of
$60. The selling price of a deluxe car seat is $150 per unit and it has a variable cost per
unit of $80.
The plant capacity of producing the Deluxe seats is 150,000 units. Assuming that the
maximum market demand for normal car seats is 80,000 units and there is no such
limitation for deluxe car seats, what would be the ideal sales mix of the normal and
deluxe car seats?
a.0 units of the normal car seat; 150,000 units of the deluxe car seat

b.100,000 units of the normal car seat; 50,000 units of the deluxe car seat

c.50,000 units of the normal car seat; 100,000 units of the deluxe car seat

d.75,000 units of the normal car seat; 75,000 units of the deluxe car seat

e.All are incorrect

Câu Hỏi 7
A manufacturer regularly produces a product called ‘Product X’, the cost card for
‘Product X’ is below:
Selling price $40
Direct materials (2kg x $4) $8
Direct labour (2 hours x $9) $18
Variable overhead $4
Contribution per unit $10
The manufacturer is at full capacity but has received an order to produce 500 units of
‘Product Y’. ‘Product Y’ can be made by transferring labour from the ‘Product X’
production line to the ‘Product Y’ production line.
If the 500 units of ‘Product Y’ will require 2,000 labour hours, what is the relevant cost
of accepting this order? $Trả lời .

Câu Hỏi 8

Relevant costing can be used to help an organisation evaluate whether or not they should
produce components internally or purchase them from an external organisation, this is
referred to as a “make or buy” decision.
Which of the following are qualitative factors that should be considered when engaging
in a “make or buy” decision?
Select ALL that apply:
a.Will the decision to “make” lead to opportunity costs as capacity declines
b.Will the decision to “buy” decrease the quality of the component

c.Will the decision to “buy” lead to a more profitable use of spare capacity

d.Will the decision to “make” focus the organisation on improving the flexibility of
production
e.Will the decision to “buy” lead to industrial disputes

Câu Hỏi 9

A company has done the following analysis:

 Product L M
$ per $ per
unit unit
Selling price 70 90
Direct labour ($7 per hour) (28) (14)
Machine hours ($10 per hour) (10) (20)
Direct material ($ 5 per kg) (10) (45)
Contribution 22 11
Demand for L and M is 400 units and 700 units respectively. Material is in short supply
and there is only 6,000 kg available.
What is the optimum contribution that can be earned?
a.All are incorrect
b.$8,800
c.$6,347
d.$15,147
e.$17,150

Câu Hỏi 10

From the options below, select the features of relevant costs.

a.Sunk costs
b.Cash flows

c.Future

d.Incremental

e.Profits

f.Historic values

g.In-differential costs

Câu Hỏi 11
Use the drop-down menus to select whether the following statements are TRUE or
FALSE:
"For decision-making purposes, avoidable costs are deemed to be Answer 1
Ch?n...
relevant costs"

"For decision-making purposes, all fixed costs are deemed to be non- Answer 2
Ch?n...
relevant costs"

"Depreciation, for decision-making purposes, is never considered a Answer 3

Ch?n...
relevant cost"

"If the resale value of machinery used in a specific job, falls in value as a Answer 4
Ch?n...
direct result of that job, this would be considered a relevant cost"

Câu Hỏi 12

From the options below, select the situation in which profit will be maximized for an
organization which has a limiting factor.
a.All are incorrect
b.The organization is producing products which earn the highest contribution per unit
c.The organization is producing products which earn the highest contribution per limiting
factor
d.The organization is producing products which use the least amount of the limiting
factor
e.The organization is producing products which earn the highest profit per unit

Câu Hỏi 13

A project is being proposed at a board meeting and several suggested costs in relation to
the project have been brought up
From the suggestions below, identify which is/ are relevant cost(s):
a.An additional monthly cost of $3,000 that would be considered as a running cost of
a new machine to be purchased for manufacturing a well-established product. The new
machine will reduce the fixed overhead absorbed by the product by $150 as it will save
on labour time.
 b.The future salary of a market researcher who will carry out the development of a
new product. The position of the market researcher would be created especially for the
new product development program. However, the $15,000 salary would be a fixed cost.
c.A $300 expense that will be paid to the marketing manager as a reimbursement
payment. The company has decided to pay this amount to the marketing manager as he
flew out to Naples, Italy to negotiate a significant contract for the company.
d.The future cost of cleaning the office space, which will amount to $150. Contractors
can clean the office and the company has the right to cancel the contract by giving one
month’s request.

Câu Hỏi 14

K Ltd is preparing a quotation for a two-month consultancy project. Currently the

company employs a consultant on an annual salary of €60,000. This consultant is fully
employed on current projects and, if he were to be transferred to this new project, then an
existing junior consultant would be used to cover his current work. The junior consultant
would be paid a bonus of €8,500 for undertaking this additional responsibility.
Alternatively the company could hire an external consultant on a two month contract at a
cost of €7,000.

The relevant cost to be used in preparing the quotation is: €Trả lời .

Câu Hỏi 15

A manufacturing company has the following information for Period 3, 20X1:

A B C D
Contribution (per unit) £14 £17 £20 £11
Labour hours required
1 1.5 2 0.5
per unit
Maximum demand (in
300 150 200 50
units)
The firm produces four different products, A, B, C and D. The firm considers labour
hours to be a single limiting factor as there are only 500 labour hours available in Period
3 20X1 due to an ongoing worker protest.
Which of the four different products will be the last to be produced in Period 3 20X1?
a.Product C
b.Product D
c.Product A
d.Product B

Câu Hỏi 16

a.All are incorrect

b.$19.15
c.$15.55
d.$11.50
e.$15.10

Câu Hỏi 17
Waxmaster Ltd is a manufacturer of candles, the firm operates with 400-500 hours per
period of excess labour capacity. This excess capacity in labour can undertake any
additional work that is provided to them.
The firm has recently received a customer order for a special type of candle that requires
5,000kgs of beeswax. The order is to be completed this period.
The procurement director reckons that the current cost of beeswax is £4.50 per kg in the
open market. Waxmaster does not currently use this ingredient regularly but they do have
500kg of this ingredient in inventory as a result of an erroneous order that was made a
year ago. The price for that order was at £4.30 per kg. This inventory could be sold for
£2,000 in its current state.
If the order is to go ahead, the firm will require 300 labour hours in the period to produce
these candles. The current wage rate in Waxmaster is £9 per hour.
This specific order is machine intensive and will drive the fixed cost of electricity from
£10,000 a period to £13,500. Electricity costs will go back to £10,000 a period once the
order is finished.
What is the total relevant cost of this customer order?

£Trả lời (Do not use commas when inserting your answer and round your
answer to the nearest whole number)

Câu Hỏi 18

Assume that dropping Product K would result in a $15,000 increase in the contribution
margin of other product lines. If Bayshore chooses to drop Product K, then the change in
net operating income next year due to this action will be a:

$Trả lời Trả lời (without comma add)

Câu Hỏi 19

A manufacturing firm produces three products in a joint process. The management

accountant has already apportioned the initial joint process costs on a per-unit basis in the
below table.

The firm can run an additional process beyond the separation point for each individual
product, the additional process will increase the value of each product but this will come
at a cost. The production manager is unsure which products are worthwhile processing
further and has asked for your help in making this decision.
Which of the products should the production manager put through the additional process?
a.Product C only
b.Product A & B only
c.Product B only
d.Product C & B only
e.Products A, B & C

Câu Hỏi 20

Alex runs a small stall that makes fresh juice using only fresh fruits and vegetables. It is
expensive and risky to run such a business mainly due to the short shelf life of his
products. To cover the risk he puts a 30% full cost mark up on his products and will not
agree to a sale for less than that. One day he receives a phone call from Agatha who runs
a nearby architects firm. She wants to treat her staff for a recently completed project and
has asked for 20 juices for £100. Alex has the following costs:
- Direct ingredients per unit: £2.00
- Direct labour per unit: £1.50
- Overhead costs: £20,000
- Planned production: 25,000 juices per annum
Will Alex accept Agatha's offer?
a.Yes

b.No

c.Impossible to say
Câu Hỏi 21
In order to utilize some spare capacity, E Plc is preparing a quotation for a special order
which requires 10,000kgs of material A. E Plc has 4,000kgs of material A in stock
(original cost $2.50 per kg). material A is used in the company’s main product, X.
Each unit of X uses 5kgs of material A, and based on an input value of $2.50 per kg of A,
each unit of X yields a contribution of $12.00. The resale value of material A is $3.50 per
kg. The present replacement price of material A is $3.00 per kg. Material A is readily
available in the market.
The relevant cost ($) of the 10,000kgs of material A in the quotation is:______________
Câu Hỏi 22
General overheads of $5,000 are based upon the overhead absorption rate of $7.50 per
unit as set in the budget. The only general overhead cost that can be specifically
identified with the job is the time that has been spent in considering the costs of the job
and preparing the quotation. This amounted to $250.
What is the relevant cost?
a. $7.50 per unit
b. $5,000
c. $250
d. All are incorrect
e. $0
Câu Hỏi 23
Quinn Co has a monthly lease of $20,000 on a factory, Quin manufactures product G,
which requires components A95 and B96. Quin already has 500 components of A95 and
250 of component B96 in stock. These components have a resale value of $15,000. Quin
needs a further 400 of component A95 to complete product G.
Quin can also produce product H instead of product G, which uses the same components
and for which QUin already has enough components in stock.
Use the above information to match Quin’s costs to the type of cost that best describes
them.

$15,000 resale value

Product H

400 component A95

Component A95 and B96

$20,000 factory lease

500 component A95 and 250 component B96

future cash flow opportunity cost incremental costs avoidable cost sunk costs
committed cost
Câu Hỏi 24
B Plc manufactures cakes and confectionery. It has received a special order from a
leading restaurant chain. This order will require 5,000 kgs of all purpose flour. This is a
material that is readily available and regularly used by B Plc. in all of its products.
There are 350kgs of all purpose flour in stock which cost £3,500 last week. The current
market price is £9.80 per kg. The all purpose flour is normally used to make B's best
selling product, chocolate cookies. Each batch of chocolate cookies requires 5kgs of all
purpose flour, and if the flour is costed at £9.50 per kg, each batch of cookies yields a
contribution of £55.
The relevant cost of the all purpose flour to be included in the costing of the special order
is: £
Câu Hỏi 25
The cost to produce 8,000 units at 70% capacity is:
- Direct materials: $16,000
-Direct labour: $8,000
-Factory overhead, all fixed: $12,000
-Selling expense (40% variable, 60% fixed): $8,000
What unit price would the company have to charge to make $2,000 on a sale of 500
additional units that would be shipped out of the normal market area?
a. $7.00
b. $7.80
c. $8.90
d. $7.40
e. All are incorrect
Câu Hỏi 26

The labour constraint is 2x + 4y s 800 and the materials

constraint is 6x + 2y ≤ 600.

The line on the graph is the labour constraint line.

The line on the graph is the materials constraint line.

The green region represents the area, the optimal solution in this particular
linear programming problem be found in the middle of this region.
Câu Hỏi 27
X Co. makes two products - Z and J. Both products are made out of material Q. Each unit
of product requires 3kg of material Q. The company is already committed to a contract to
make 160 units of Z
If a total of 350 units of J can be made, what is the inventory of material Q in kgs?

Câu Hỏi 28
From the options below, select the information that is required when deciding whether to
further process a product.
● a. The unit selling price of the product after further processing
● b. The unit selling price of the product at the point of separation
● c. The actual output of the product from the joint process
● d. The percentage losses of further processing the product
● e. The further processing costs of the product
● f. The variable costs of the split-off products from the joint process
● g. The common costs of the joint process
Câu Hỏi 29
Dockham Company makes two products from a common input. Joint processing costs up
to the split-off point total $33,600 a year. The company allocates these costs to the joint
products on the basis of their total sales values at the split-off point. Each product may be
sold at the split-off point or processed further. Data concerning these products appear
below:

What is the minimum amount the company should accept for product X if it to be sold at
the split-off point?
a. $14,000
b. $32,500
c. $50,200
d. $40,300
e. $23,900
Câu Hỏi 30
A manufacturing company requires 3 component materials: X, Y and Z. They can
produce the components in house or may purchase them externally.

X Y Z

Variable costs $4 $20 $16

Fixed costs $8 $12 $4

Total unit price $12 $32 $20

The fixed costs relate to their share of centrally allocated overheads. An external contract
has offered to supply the components at the price of:
X = $6
Y = $18
Z = $19
Which components should the company buy externally?
a. Y only
b. All 3 components
c. None of the components
d. X only
e. Z only