Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781119034681
Author: Weygandt
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 7, Problem 7.18E
Identify relevant costs for different decisions.
(LO 1,2,3,4,5,6), C
The costs listed below relate to a variety of different decision situations.
Cost | Decision |
1. Unavoidable fixed overhead | Eliminate an unprofitable segment |
2. Direct labor | Make or buy |
3. Original cost of old equipment | Equipment replacement |
4. Joint production costs | Sell or process further |
S. Opportunity cost | Accepting a special order |
6. Segment manager’s salary | Eliminate an unprofitable segment (manager will be terminated) |
7. Cost of new equipment | Equipment replacement |
8. Incremental production costs | Sell or process further |
9. Direct materials | Equipment replacement (the amount of materials required does not change) |
10. Rent expense | Purchase or lease a building |
Instructions
For each cost listed above, indicate if it is relevant or not to the related decision. For those costs determined to be irrelevant, briefly explain why.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Answer
1. Which of the following costs/expenses is included in product costs under both
absorption costing and variable costing?
A) Equipment depreciation.
B) Variable manufacturing costs.
Variable selling expenses.
D) Supervisory salaries.
2. What is the costing method that can be used most easily with break-even analysis and
other cost-volume-profit techniques?
A) Process costing.
B) Job-order costing.
C) Absorption costing.
D) Variable costing.
3. The Predetermined Overhead Rate is $18.50 per machine hour. During the year, actual
manufacturing overhead expenses incurred were $456,000 and the machine operated for
24,550 hours. This means:
A) Manufacturing overhead is overapplied
B)
Before any adjustments, net income is understated
C) No journal entry is needed
D) The balance in the MOH account is zero
E) None of the above
4. Why would an activity-based costing system that is designed for internal decision
making NOT conform to generally accepted accounting principles?
A) First-stage…
Which of the following statements is false?
Multiple Choice
Examples of selling costs include shipping, sales commissions, and costs of finished goods warehouses.
Discretionary fixed costs may be altered in the short term by current managerial decisions.
A particular cost may be direct or indirect depending on the cost object.
All sunk costs should be ignored in making a decision.
Some of the conversion costs are period costs.
1. Cost: Salary of marketing manager
Decision: Project discontinuance: manager to be transferred elsewhere in the firm
Relevant or Irrelevant?
2. Cost: Home theater installation
Decision: Purchase of a new home
Relevant or Irrelevant?
3. Cost: Unavoidable fixed overhead
Decision: Plant closure
Relevant or Irrelevant?
Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2QCh. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q
Ch. 7 - Your roommate. Gale Dunham, is confused about sunk...Ch. 7 - Prob. 12QCh. 7 - The steps in managements decision-making process...Ch. 7 - Determine incremental changes. (LO 1), AP Bogart...Ch. 7 - At Bargain Electronics, it costs 30 per unit (20...Ch. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Prob. 7.6BECh. 7 - Prob. 7.7BECh. 7 - Lisah, Inc., manufactures golf clubs in three...Ch. 7 - Nathan T Corporation is comparing two different...Ch. 7 - Prob. 7.2DICh. 7 - Wilma Company must decide whether to make or buy...Ch. 7 - Prob. 7.4DICh. 7 - Prob. 7.5DICh. 7 - Prob. 7.6DICh. 7 - As a study aid. your classmate Pascal Adams has...Ch. 7 - Use incremental analysis for special-order...Ch. 7 - Moonbeam Company manufactures toasters. For the...Ch. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Use incremental analysis for make-or-buy decision....Ch. 7 - Prob. 7.7ECh. 7 - Prepare incremental analysis concerning...Ch. 7 - Anna Garden recently opened her own basketweaving...Ch. 7 - Stahl Inc. produces three separate products from a...Ch. 7 - Kirk Minerals processes materials extracted from...Ch. 7 - Prob. 7.12ECh. 7 - On January 2, 2016, Twilight Hospital purchased a...Ch. 7 - Use incremental analysis for retaining or...Ch. 7 - Veronica Mars, a recent graduate of Bells...Ch. 7 - Cawley Company makes three models of lasers....Ch. 7 - Tharp Company operates a small factory in which it...Ch. 7 - Identify relevant costs for different decisions....Ch. 7 - ThreePoint Sports Inc. manufactures basketballs...Ch. 7 - Use incremental analysis related to make or buy....Ch. 7 - Prob. 7.3APCh. 7 - Compute gain or loss, and determine if equipment...Ch. 7 - Brislin Company has four operating divisions....Ch. 7 - CURRENT DESIGNS Current Designs faces a number of...Ch. 7 - Decision-Making Across the Organization Aurora...Ch. 7 - MiniTek manufactures private-label small...Ch. 7 - Prob. 7.3BYPCh. 7 - Communication Activity Hank Jewell is a production...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Considering Your Costs and Benefits School costs...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.arrow_forwardFixed overhead costs that will continue regardless of a make-or-buy decision are ________ to the make-or-buy decision. a-relevant b-irrelevant c-incremental costs d-differential costs e-opportunity costsarrow_forwardWhich among the following is not a relevant cost for decision making? a. Cost of producing additional units in case an order is accepted b. Future rent payments c. Depreciation of machinery d. Costs that can be avoided as a result of managerial decisionsarrow_forward
- Question Content Area Which of the following is a reason for easy identification and control of variable manufacturing costs under the variable costing method? a. Fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. b. Variable and fixed costs are reported separately. c. Variable costs can be controlled by the operating management. d. all of the abovearrow_forwardUsing ABC product cost information when considering reducing cost, which of the following would not be a way to reduce activity costs? a.Improve operations so that the activity-base usage per unit is eliminated. b.Switch to a plantwide allocation rate. c.Improve operations so that the activity-base usage per unit is reduced. d.Change the classification of employees doing an activity to decrease the activity rate.arrow_forwardWhich of the following is FALSE regarding Variable Costing? O A. Net income will only change if the number of units sold changes. B. If the number of units sold are greater than the number of units produced, a portion of fixed overhead is "deferred." C.Seling and administrative costs are treated as period costs and are expensed as they are incurred. O D. Fixed overhead is treated as a period cost and is expensed as it is incurred. Reset Selectionarrow_forward
- Please answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it 4. Which of the following statements is true? An activity measure in activity-based costing expresses how much of an activity is carried out and it is used as the allocation base for assigning overhead costs to products and services. Activity-based management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects. An activity-based costing system is generally more difficult to set up and run than a traditional cost system. Multiple Choice Statements I and II are true. Statements II and III are true. All of the statements are true. None of the statements are true.arrow_forwardThe reason for charging indirect costs to cost centres is to: A. Calculate the cost of direct materials B. Calculate the cost of direct labour C. Allow overheads to be charged to cost units D. Allow overheads to be charged to expenses In what circumstances might a company be prepared to price a special contract at less than its relevant cost? A. When there are signs of improved market conditions. B. In the expectation that additional profitable orders will be placed by the same customer. C. When sales of other products will not increase. D. When the company is operating at almost full capacity.arrow_forwardIt is known that a new fee will increase if the order made by the customer increases. Based on this information, the cost is included in the cost hierarchy category? a. customer -batch level cost b.customer output unit-level costs c.customer cost d. division sustaining costs e. there is no right answerarrow_forward
- Which of the following statements regarding activity-based costing (ABC) is NOT correct? a. Under ABC cost centres are replaced by cost pools b. Blanket overhead recovery rates (OAR) are replaced with cost driver rates c. ABC uses one common overhead recovery rate, such as labour hours. d. ABC tackles the problems of absorption costing by adopting a much more accurate way of charging overhead to cost units.arrow_forwardmultiple choice 1. What is the difference between “Absorption costing”, “Variable costing” and “Throughput costing”?to. Under Variable costing, fixed manufacturing costs are NOT inventoriedb. Under Throughput costing, only direct raw material costs are inventoriedc. Both "a" and "b" are correctd. Neither "a" nor "b" are correct 2. If a manufacturing company does NOT have inventories, the difference between operating income under absorption costing and operating income under variable costing will be:to. equal to the variable overhead that the company incurred.b. equal to the fixed overhead that the company incurredc. equal to the sum of fixed overhead and incurred variable overheadd. neither, both amounts will be equalarrow_forwardWhich of the following statements is true of activity-based costing? O a. Activities are the cost objects of the second stage of ABC. O b. ABC ignores the allocation of storage costs. O c. ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products. O d. An activity cost pool collects costs related to the same activity. DUS PAGE NEXT PAGE e here to search 11:38 O a dx ENG 22-05-2021 hp రు 144 ort sc delete end home 4 7\ - backspace num lock E 8. home F K enter pause M ↑ shift end alt ctrlarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Profitability index; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Md5ocNqKHq8;License: Standard Youtube License