Question : Objective 11.5 1) The theory of constraints (TOC) defines throughput margin : 1211769

Objective 11.5

1) The theory of constraints (TOC) defines throughput margin as ________.

A) operating income minus the direct material costs of the goods sold

B) operating income minus the direct labor costs of the goods sold

C) revenues minus the direct material costs of the goods sold

D) revenues minus the full costs of the goods sold

2) Based on the theory of constraints, investments equal ________.

A) the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and business function costs

B) the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings

C) the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and full costs

D) the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; sunk costs, full costs, and business function costs

3) Operating costs include all operating costs except depreciation.

4) The theory of constraints is more useful for the long-run management of costs since it takes a long-run

perspective and focuses on improving processes by eliminating non-value-added activities and reducing the costs of performing value-added activities.

5) Activity based costing (ABC) systems are less useful than the theory of constraints (TOC) for long-run pricing, cost control, and capacity management.

6) Compare and contrast the theory of constraints and activity based costing. Which is more useful in short-run and long-run management of costs?

Answer the following questions using the information below:

Genent’s Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make-or-buy decision, a cost analysis revealed the following avoidable unit costs for the decorative jars:

Direct materials$0.50

Direct labor0.06

Unit-related support costs0.20

Batch-related support costs0.24

Product-sustaining support costs0.44

Facility-sustaining support costs0.56

Total cost per jar$2.00

7) The relevant cost per jar is ________.

A) $0.56 per jar

B) $0.76 per jar

C) $1.44 per jar

D) $2.00 per jar

8) The maximum price that Genent’s Preserves should be willing to pay for the decorative jars is ________.

A) $0.56 per jar

B) $0.76 per jar

C) $0.44 per jar

D) $2.00 per jar

Objective 11.6

1) Which of the following is an irrelevant cost?

A) warranty costs

B) advertising expenses

C) depreciation

D) prepaid insurance

2) When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

A) $50,000, cost of the old machine

B) $20,000, cost of the new machine

C) $10,000, selling price of the old machine

D) $3,000, annual savings in operating costs if the new machine is purchased