The choice is not really whether to make or buy, but rather how to best utilize available production capacity

ACCOUNTING

True or False

The choice is not really whether to make or buy, but rather how to best utilize available production capacity

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If the $17,000 spent to purchase inventory could be invested and earn interest of $1,000, then the opportunity cost of holding inventory is $17,000

ACCOUNTING

True or False

If the $17,000 spent to purchase inventory could be invested and earn interest of $1,000, then the opportunity cost of holding inventory is $17,000

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When capacity is constrained, relevant costs equal incremental costs plus opportunity costs

ACCOUNTING

True or False

When capacity is constrained, relevant costs equal incremental costs plus opportunity costs

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When opportunity costs exist, they are always relevant

ACCOUNTING

True or False

When opportunity costs exist, they are always relevant

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In a make-or-buy decision when there are alternative uses for capacity, the opportunity cost of idle capacity is relevant

ACCOUNTING

True or False

In a make-or-buy decision when there are alternative uses for capacity, the opportunity cost of idle capacity is relevant

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When a firm maximizes profits it will simultaneously minimize opportunity costs

ACCOUNTING

True or False

When a firm maximizes profits it will simultaneously minimize opportunity costs

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Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part

ACCOUNTING

True or False

Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part

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If a company is deciding whether to outsource a part, the reliability of the supplier is an important factor to consider

ACCOUNTING

True or False

If a company is deciding whether to outsource a part, the reliability of the supplier is an important factor to consider

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Sometimes qualitative factors are the most important factors in make-or-buy decisions

ACCOUNTING

True or False

Sometimes qualitative factors are the most important factors in make-or-buy decisions

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Absorption cost per unit is the best product cost to use for one-time-only special order decisions

ACCOUNTING

True or False

Absorption cost per unit is the best product cost to use for one-time-only special order decisions

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Producing another 10,000 units may increase the fixed cost of rent

ACCOUNTING

True or False

Producing another 10,000 units may increase the fixed cost of rent

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If Option 1 costs $100 and Option 2 costs $80, then the differential cost is $180

ACCOUNTING

True or False

If Option 1 costs $100 and Option 2 costs $80, then the differential cost is $180

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An incremental product cost is generally a fixed cost

ACCOUNTING

True or False

An incremental product cost is generally a fixed cost

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Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders

ACCOUNTING

True or False

Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders

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The price quoted for a one-time-only special order may be less than the price for a long-term customer

ACCOUNTING

True or False

The price quoted for a one-time-only special order may be less than the price for a long-term customer

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For one-time-only special orders, variable costs may be relevant but not fixed costs

ACCOUNTING

True or False

For one-time-only special orders, variable costs may be relevant but not fixed costs

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Full costs of a product include variable costs, but not fixed costs

ACCOUNTING

True or False

Full costs of a product include variable costs, but not fixed costs

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Full costs of a product are relevant for one-time-only special order pricing decisions

ACCOUNTING

True or False

Full costs of a product are relevant for one-time-only special order pricing decisions

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Relevant revenues and relevant costs are the only information managers need to select among alternatives

ACCOUNTING

True or False

Relevant revenues and relevant costs are the only information managers need to select among alternatives

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If a manufacturer chooses to continue purchasing direct materials from a supplier because of the ongoing relationship that has developed over the year

ACCOUNTING

True or False

If a manufacturer chooses to continue purchasing direct materials from a supplier because of the ongoing relationship that has developed over the years, the decision is based on qualitative factors

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Qualitative factors are outcomes that are measured in numerical terms, such as the costs of direct labor

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True or False

Qualitative factors are outcomes that are measured in numerical terms, such as the costs of direct labor

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Quantitative factors are always expressed in numerical terms

ACCOUNTING

True or False

Quantitative factors are always expressed in numerical terms

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Sunk costs are past costs that are unavoidable

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True or False

Sunk costs are past costs that are unavoidable

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Revenues that remain the same for two alternatives being examined are relevant revenues

ACCOUNTING

True or False

Revenues that remain the same for two alternatives being examined are relevant revenues

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A cost may be relevant for one decision, but not relevant for a different decision

ACCOUNTING

True or False

A cost may be relevant for one decision, but not relevant for a different decision

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For a particular decision, differential revenues and differential costs are always relevant

ACCOUNTING

True or False

For a particular decision, differential revenues and differential costs are always relevant

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For decision making, differential costs assist in choosing between alternatives

ACCOUNTING

True or False

For decision making, differential costs assist in choosing between alternatives

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The amount paid to purchase tools last month is an example of a sunk cost

ACCOUNTING

True or False

The amount paid to purchase tools last month is an example of a sunk cost

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Feedback from previous decisions uses historical information and, therefore, is irrelevant for making future predictions

ACCOUNTING

True or False

Feedback from previous decisions uses historical information and, therefore, is irrelevant for making future predictions.

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A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses

ACCOUNTING

True or False

A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses

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Pam’s Stables used two different independent variables (trainer's hours and number of horses) in two different equations to evaluate the cost

ACCOUNTING

Multiple Choice

Pam’s Stables used two different independent variables (trainer's hours and number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows:



Trainer's hours:

Variable Coefficient Standard Error t-Value

Constant 913.32 198.12 4.61

Independent Variable 20.90 2.94 7.11



r2 = 0.56



Number of horses:

Variable Coefficient Standard Error t-Value

Constant 4,764.50 1,073.09 4.44

Independent Variable 864.98 247.14 3.50



r2 = 0.63



What is the estimated total cost for the coming year if 16,000 trainer hours are incurred and the stable has 400 horses to be trained, based on the best cost driver?

a. $99,929.09

b. $350,756.50

c. $335,313.32

d. $13,844,444.50

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Craig’s Cola was to manufacture 1,000 cases of cola next week

ACCOUNTING

Multiple Choice

Craig’s Cola was to manufacture 1,000 cases of cola next week. The accountant provided the following analysis of total manufacturing costs.



Variable Coefficient Standard Error t-Value

Constant 100 71.94 1.39

Independent variable 200 91.74 2.18



r2 = 0.82



What is the estimated cost of producing the 1,000 cases of cola?

a. $200,100

b. $142,071

c. $100,200

d. $9,000

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The Bhaskara Corporation used regression analysis to predict the annual cost of indirect materials

ACCOUNTING

Multiple Choice

The Bhaskara Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows:



Indirect Materials Cost Explained by Units Produced

Constant $21,890

Standard error of Y estimate $4,560

r2 0.7832

Number of observations 22



X coefficient(s) 11.75

Standard error of coefficient(s) 2.1876



What is the linear cost function?

a. Y = $21,890 + $11.75X

b. Y = $4,560 + $5.15X

c. Y = $20,100 + $4.60X

d. none of the above

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The coefficient of determination is important in explaining variances in estimating equations

ACCOUNTING

Multiple Choice

The coefficient of determination is important in explaining variances in estimating equations. For a certain estimating equation, the unexplained variation was given as 26,505. The total variation was given as 46,500. What is the coefficient of determination for the equation?

a. 0.34

b. 0.43

c. 0.57

d. 0.66

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All of the following are cost analysis problems EXCEPT

ACCOUNTING

Multiple Choice

All of the following are cost analysis problems EXCEPT

a. fixed costs are allocated as if they are variable costs.

b. extreme observations are adjusted or removed.

c. time periods differ for measuring items included in the dependent variable and the cost driver(s).

d. homogeneous relationships between individual cost items in the dependent variable pool and cost drivers may not be present.

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Extreme values of observations may be the result of

ACCOUNTING

Multiple Choice

Extreme values of observations may be the result of

a. a misplaced decimal point in the recorded data.

b. classifying a cost incorrectly.

c. a temporary plant shutdown.

d. all of the above.

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Managers that design data collection reports that regularly and routinely obtain required data are helping to ensure that

ACCOUNTING

Multiple Choice

Managers that design data collection reports that regularly and routinely obtain required data are helping to ensure that

a. inflationary effects are removed.

b. all data are recorded.

c. extreme values are not used to calculate cost functions.

d. the relationship between the cost driver and the cost remains stable over time.

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Data collection problems arise when

ACCOUNTING

Multiple Choice

Data collection problems arise when

a. data are recorded electronically rather than manually.

b. accrual-basis costs are used rather than cash-basis costs.

c. fixed and variable costs are not separately identified and both are allocated to products on a per unit basis.

d. purely inflationary price effects are removed.

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The ideal database contains

ACCOUNTING

Multiple Choice

The ideal database contains

a. numerous cost driver observations.

b. reliably measured observations.

c. cost driver observations spanning a wide range.

d. all of the above.

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The learning-curve models presented in the text

ACCOUNTING

Multiple Choice

The learning-curve models presented in the text

a. examine how quality increases over time.

b. examine how efficiency increases as more units are produced.

c. examine how setup costs decline as more workers are added.

d. examine the change in variable costs when quantity discounts are available.

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Intermediate Accounting 13th Edition Solutions Manual - Kieso

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Intermediate Accounting 13th Edition Solutions Manual, Weygandt, Kieso and Warfield

Intermediate Accounting 13th Edition Solutions, Weygandt, Kieso and Warfield

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