Question : 71. Gibson Corporation makes indoor gas fireplaces. A standard fireplace includes : 1208222

 

71. Gibson Corporation makes indoor gas fireplaces. A standard fireplace includes unit-level materials, labor, and overhead costs. In addition, the company incurs product-level engineering and advertising costs. The sales staff is paid a 5% commission on each fireplace sold. A sales representative has been in contact with a building developer who wants to buy 20 fireplaces only if he can buy them at amount lower that Gibson’s selling price. Which of the following costs would be relevant to this special order decision? 
A. The sales commissions
B. The unit-level materials, labor, and overhead
C. The product-level engineering and advertising costs
D. All of the other answers are correct.

72. Gibson Corporation is evaluating two decision alternatives.
  
Which of the following statements is true? 
A. Differential revenue among the alternatives is equal to $700.
B. Differential revenue among the alternatives is equal to $800.
C. Differential revenue among the alternatives is equal to $600.
D. Differential revenue among the alternatives is equal to $500.

73. Which of the following statements is incorrect? 
A. Variable costs are often relevant in decision making because they serve as proxies for avoidable costs.
B. Constraints are limitations on a company’s ability to satisfy demands for its products.
C. Constraints are also referred to as bottlenecks.
D. Managers seek to maximize the impact of bottlenecks on the operations of a business.

74. Which of the following is a true statement regarding product-level costs? 
A. Product-level costs are only relevant to a decision when adding a product to a company’s product line.
B. Product-level costs are not relevant to outsourcing decisions.
C. Product-level costs are generally not relevant to special order decisions.
D. Product-level costs are incurred to support the entire company.

75. All of the following are examples of product-level costs except: 
A. Engineering design costs.
B. Inventory holding costs.
C. Inspection costs.
D. Patent costs.

76. East Hills Company makes and sells scooters. East Hills incurred the following costs in its most recent fiscal year:
  
East Hills can currently purchase the scooters it makes from another company. If the company purchases the scooters, East Hills would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified as a unit-level cost? 
A. Company president’s salary
B. Depreciation on manufacturing equipment
C. Real estate taxes on factory
D. Shipping and handling

77. East Hills Company makes and sells scooters. East Hills incurred the following costs in its most recent fiscal year:
  
East Hills can currently purchase the scooters it makes from another company. If the company purchases the scooters, East Hills would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified as a facility-level cost? 
A. Company president’s salary
B. Shipping and handling
C. Materials cost
D. Research and development costs

78. East Hills Company makes and sells scooters. East Hills incurred the following costs in its most recent fiscal year:
  
East Hills can currently purchase the scooters it makes from West Hills Company. If the company purchases the scooters, East Hills would still continue to use its own logo, sales staff, and advertising programs. If East Hills outsources the scooters to West Hills, which of the following costs would be relevant to the outsourcing decision? 
A. Materials cost ($10 per unit)
B. Real estate taxes on factory
C. Research and development costs
D. All of the other answers are correct.

79. Which of the following statements is true? 
A. Outsourcing increases the extent of a company’s vertical integration.
B. Reputation of the supplier is a critical issue in an outsourcing decision.
C. An outsourcing decision involves a purchase offer from a customer at a lower-than-normal selling price.
D. All of the other answers are true.

80. Asset replacement decisions involve: 
A. Choices between continuing operating existing equipment or replacing it with used equipment.
B. Choices between closing down or continuing to operate a segment of a business.
C. Choices between continuing operating existing equipment or replacing it with new equipment.
D. None of the other answers are correct.

81. Which costs are relevant for equipment replacement decisions? 
A. Unit-level costs
B. Batch-level costs
C. Product-level costs
D. All of the other answers are correct.

82. Breezy Company is disposing of equipment that was originally purchased for $300,000 and has $120,000 of accumulated depreciation to date. The same equipment would cost $420,000 to replace. What is the total amount of sunk cost? 
A. $120,000
B. $180,000
C. $300,000
D. $420,000

83. Max bought tickets to the championship baseball game for $75. Someone approaches him outside the stadium and offers him $175 for his ticket. If Max decides to go the game, instead of selling his ticket, how much does it cost Max to go the game? 
A. $75
B. $100
C. $175
D. None of the other answers are correct.

84. Starlight Automotive Corporation is an automobile manufacturer. The company produces its own motors, tires, and other automobile parts. Starlight has the opportunity to purchase tires from another manufacturer instead of producing them in their own facility. This type of decision is typically known as a(n): 
A. Special order decision.
B. Outsourcing decision.
C. Segment elimination decision.
D. Equipment replacement decision.

 

 

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