Acc 211 Exam 3 - Missouri State University – Thornton Practice Questions and Answers

Acc 211 Exam 3 - Missouri State University – Thornton Practice Questions and Answers What are the steps in the decision making model? - Ans:-1. Recognize and define the problem 2. Identify alternatives as possible solutions to the problem 3. Identify the costs and benefits associated with each feasible alternative 4. Estimate the relevant costs and benefits for each feasible alternative 5. Assess qualitative factors 6. Make the decision by selecting the alternative with the greatest overall net benefit What is the decision making model? - Ans:-A specific set of procedures that produce a decision - can be used to structure the decision makers thinking and organize the information to make a good decision Relevant Costs characteristics - Ans:-they are future items AND they differ across alternatives Opportunity cost - Ans:-The benefit sacrificed or forgone when one alternative is chosen over another ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 2/20 - relevant because it is both a future cost and one that differs across alternatives - never an accounting cost, because accountants to not record the cost of what might happen in the future (i.e they do not appear in financial statements) Sunk cost - Ans:-A cost that cannot be affected by any future action - all managers should ignore sunk costs for relevant decisions What are the relevant costing decisions? - Ans:-1. to make or by a component 2. to keep or drop a segment or product or service line 3. to accept a special order at less than the usual price 4. to further process joint products or sell them at the split off point Make-or-by decisions - Ans:-those decisions involving a choice between internal and external production - managers face the decision of whether to make a particular product (or provide a service) or to purchase it from an outside supplier Special order decisions - Ans:-focus on whether a specifically priced order should be accepted or rejected ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 3/20 - these orders can be attractive, especially when the firm is operating below its maximum productive capacity Keep or drop decisions - Ans:-requires that managers identify and consider only the relevant information of the business segment question What is a segment? - Ans:-a subunit of a company that a separate performance report is created from other areas - Ex: a particular product or service line or geographic sales region - segmented reports prepared on a variable-costing basis are important because they provide managers with this valuable information Why is identifying the relevant information necessary? - Ans:-for making effective keep or drop decisions What are constraints? - Ans:-Every firm faces limited resources and limited demand for each product Ex: limitations of raw materials, limitations of skilled labor, limited demand for each product Target costing - Ans:-a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay What do budgets do? - Ans:-help management ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 4/20 1. plan ahead 2. exercise control by comparing what actually happened to what was expected in the budget 3. formalize expectations regarding sales Split off cost - Ans:-the location in a production process where jointly manufactured products are henceforth manufactured separately; thus, their costs can be identified individually after the split-off pint. Prior to the split-off pint, production costs are allocated to jointly manufactured products Operating costs when a division is dropped - Ans:- Segment margin - Ans:-the amount of net profit or loss generated by a portion of a business - useful to track in order to learn which parts f total business are performing better or worse than average After-the-fact flexible budget is useful for what? - Ans:-control Static Budget - Ans:-A budget prepared for a particular level of activity In going from the sales budget to the production budget, adjustments to the sales budget need to be made for what? - Ans:-Finished goods inventories Know how to find expected cash receipts - Ans:- ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 5/20 Comparing static budget to actual costs - Ans:- Know how to find budgeted overhead for a particular month - Ans:- The Fixed volume overhead variance is a measurement of what? - Ans:-Both the effect of the actual output differing from the output used to calculate the predetermined fixed overhead rate and the cost of unused activity capacity Know how to find standard hours allowed for a volume - Ans:- LEV = (AH-SH)xSR - Ans:- Planning - Ans:-looking ahead to see what actions control - Ans:-looking backwards, determining what actually happe