Roll Number:___________________________________ Total 8 points 10 minutes

MANAGERIAL ACCOUNTING AND CONTROL SYSTEMS

EXECUTIVE MBA 2020 QUIZ 5 12 May 2019

1. Costs which are always relevant in decision making are those costs which are: 
 
A.  variable.
B.  avoidable.
C.  sunk.
D.  fixed.

2. A general rule in relevant cost analysis is: 

 
A.  variable costs are always relevant.
B.  fixed costs are always irrelevant.
C.  differential future costs and revenues are always relevant.
D.  depreciation is always irrelevant.

Fixed costs will often be irrelevant for short-term decision making because they: 
 
A.  Do not vary on a per-unit-of-output basis.
B.  Are the same each time period.
C.  Typically do not differ between decision alternatives being considered.
D.  Are not committed.
E.  Cannot be estimated with precision.

All of the following are characteristic of relevant costs except:  

A.  They are generally variable.

B.  They are not committed.
C.  They are different in amount for different options.
D.  They are costs that will be incurred in the future.
E.  They are inventory-related costs.

Done on a regular basis, relevant cost pricing in "special-order decisions" can erode normal pricing policies and lead to:  

A.  Overconfidence in decision-making.

B.  A decrease in the firm's long-term profitability.
C.  Goal congruence between management and sales personnel.
D.  A cost leadership strategy.
E.  Maximization of the value stream.
Zippy Company has a product that it currently sells in the market for $50 per unit. Zippy has developed a new feature
which, if added to the existing product, will allow Zippy to receive a price of $65 per unit. The cost of adding this new
feature is $26,000 and Zippy expects to sell 1,600 units in the coming year. What is the net effect on next-year's operating
income of adding the feature to the product? 

A.  $2,000 increase in operating income.

B.  $3,000 decrease in operating income.
C.  $3,500 increase in operating income.
D.  $4,000 decrease in operating income.
E.  $2,000 decrease in operating income.

Regis Company manufactures plugs at a cost of $36 per unit, which includes $8 of fixed overhead. Regis needs 30,000 of
these plugs annually (as part of a larger product it produces). Orlan Company has offered to sell these units to Regis at $33
per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead cost will be eliminated, and the
company may be able to rent the facility previously used for manufacturing the plugs.

If Regis Company purchases the plugs but does not rent the unused facility, the company would:  
 

A.  Save $3.00 per unit.

B.  Lose $6.00 per unit.
C.  Save $2.00 per unit.
D.  Lose $3.00 per unit.
E.  Save $1.00 per unit.