ACCT 200 Final: Final Exam Chapter 12 Review

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silverhorse264

30 Oct 2014

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Relevant revenues- revenues that change based on the alternative (a or b) we choose. Relevant costs - costs that change based on the alternative (a or b) we choose. Irrelevant revenues - revenues that wont change no matter which alternative you use. Irrelevant costs - costs that won"t change no matter which alternative ( a or b) you choose. Sunk cost- cost that we incurred in the past that can"t be changed no matter which alternative you choose. Opportunity costs- revenue we could have earned if we had chosen the other alternative. Differential revenue - the amount of increase or decrease in revenue expected in the future because of one course of action as compared with an alternative. Differential costs - the amount of increase or decrease in costs expected because of the choices you made. Product profitability in the short run is generally measured by cm.

Related Questions

1. Which of the following costs is not relevant in aspecial-order decision?
A. Direct labor
B. Direct materials
C. Variable overhead
D. Fixed overhead

2. Costs that change across decision alternatives are
A. accounting costs.
B. activity-based costs.
C. incremental costs.
D. capital costs.

4. The potential benefit of one alternative that is lost bychoosing another is known as a(n):
A. Sunk cost
B. Out-of-pocket cost
C. Differential cost
D. Opportunity cost

5. A cost that cannot be avoided or changed because it arisesfrom a past decision, and is irrelevant to future decisions, iscalled a(n):
A. Uncontrollable cost
B. Incremental cost
C. Opportunity cost
D. Sunk cost

6. An additional cost that is incurred only if a particularaction is taken is a(n):
A. Period cost
B. Pocket cost
C. Discount cost
D. Incremental cost

7. The payback period:
a. Is the length of time necessary to recover the entire cost of aninvestment from its resulting annual net cash flow.
b. Is the length of time necessary to recover the entire cost of aninvestment from its resulting annual net income.
c. Takes into consideration the profitability of an investment overits entire life, but ignores the timing of its future cashflows.
d. Takes into consideration both the profitability of an investmentover its entire life and the timing of its future cash flows.

emeralddeer628

Parisian Cosmetics Company is planning a one-month campaign for September to promote sales of one of its two cosmetics products. A total of $140,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

	Moisturizer	Perfume
Unit selling price	$55	$60
Unit production costs:
Direct materials	$ 9	$14
Direct labor	3	5
Variable factory overhead	3	5
Fixed factory overhead	6	4
Total unit production costs	$21	$28
Unit variable selling expenses	16	15
Unit fixed selling expenses	12	6
Total unit costs	$49	$49
Operating income per unit	$ 6	$11

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 22,000 additional units of moisturizer or 20,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product.

	Required:
1.	Prepare a differential analysis as of August 21 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
2.	Determine whether to promote moisturizer (Alternative 1) or promote perfume (Alternative 2).
3.	The sales manager had tentatively decided to promote perfume, estimating that operating income would be increased by $80,000 ($11 operating income per unit for 20,000 units, less promotion expenses of $140,000). The manager also believed that the selection of moisturizer would reduce operating income by $8,000 ($6 operating income per unit for 22,000 units, less promotion expenses of $140,000). State briefly your reasons for supporting or opposing the tentative decision.

Differential Analysis

Promote Moisturizer (Alternative 1) or Promote Perfume (Alternative 2)

August 21

1	Promote Moisturizer	Promote Perfume	Differential Effect on Income
2	(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5
6
7
8
9
10

2. Determine whether to promote moisturizer (Alternative 1) or promote perfume (Alternative 2).

A. Promote perfume.

B. Promote moisturizer.

C. The company is indifferent since the result is the same regardless of which alternative is chosen.

3. The sales manager had tentatively decided to promote perfume, estimating that operating income would be increased by $80,000 ($11 operating income per unit for 20,000 units, less promotion expenses of $140,000). The manager also believed that the selection of moisturizer would reduce operating income by $8,000 ($6 operating income per unit for 22,000 units, less promotion expenses of $140,000). State briefly your reasons for supporting or opposing the tentative decision.

The sales managerâs tentative decision should be_(accepted/opposed)____ . The sales manager_(erroneously/correctly)____ considered the full unit costs instead of the differential (additional) revenue and differential (additional) costs. An analysis similar to that presented in part (1) would lead to the selection of_perfume/moisturizor_____ for the promotional campaign because this alternative will contribute_(less/more)____ to operating income than would be contributed by promoting_perfume/moisturizor_______.

silverwolf483

Crystal Displays Inc. recently began production of a newproduct, flat panel displays, which required the investment of$1,500,000 in assets. The costs of producing and selling 5,000units of flat panel displays are estimated as follows:

1	Variable costs per unit:
2	Direct materials	$119.00
3	Direct labor	32.00
4	Factory overhead	52.00
5	Selling and administrative expenses	36.00
6	Total variable cost per unit	$239.00
7	Fixed costs:
8	Factory overhead	$245,000.00
9	Selling and administrative expenses	147,000.00

Crystal Displays Inc. is currently considering establishing aselling price for flat panel displays. The president of CrystalDisplays has decided to use the cost-plus approach to productpricing and has indicated that the displays must earn a 17% returnon invested assets.

1. Determine the amount of desired profit from the productionand sale of flat panel displays.

2. Assuming that the product cost method is used, determine (a)the cost amount per unit, (b) the markup percentage, and (c) theselling price of flat panel displays. Round your markup percentageand selling price to two decimal places.

Cost amount per unit
Markup percentage	%
Selling price

3. (Appendix) Assuming that the total cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.

Cost amount per unit
Markup percentage	%
Selling price

4. (Appendix) Assuming that the variable cost method is used,determine (a) the cost amount per unit, (b) the markup percentage,and (c) the selling price of flat panel displays. Round your markuppercentage and selling price to two decimal places.

Cost amount per unit
Markup percentage	%
Selling price

5. Comment on any additional considerations that could influenceestablishing the selling price for flat panel displays.

The cost-plus approach price computed above should be viewed asa general guideline for establishing long-run normal prices;however, other considerations, such as , could lead management toestablish a different short-run price.

6a. Prepare a differential analysis of the proposed sale toMaple Leaf Visual Inc. Refer to the lists of Labels and AmountDescriptions for the exact wording of the answer choices for textentries. For those boxes in which you must enter subtracted ornegative numbers use a minus sign. If there is no amount or anamount is zero, enter â0â. A colon (:) will automatically appear ifrequired.

Differential Analysis

Reject (Alternative 1) or Accept (Alternative 2) Order

August 3

1	Reject Order	Accept Order	Differential Effect on Income
2	(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5
6

6b. Based on the differential analysis in part (a), should theproposal be accepted?

The company is indifferent since the result is the sameregardless of which alternative is chosen.

Yes

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ACCT 200 Final: Final Exam Chapter 12 Review

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