A segment of a business reported a contribution margin of $36,000 and controllable fixed costs of $12,000.

QUESTIONS:

1.       Which of the following is NOT a step in the decision making process?

a.       Explore workable alternatives

b.      Determine relevant cost and revenue data

c.       Consider appropriate non-financial factors

2.  Which of the following is NOT a consideration when determining whether to continue making a part or to buy that part?

A. timing of the cash receipts and expenditures

b. opportunity cost

c. impact on employees

d. sunk cost

3. When Direct costing is used, cost of goods sold reflects:

A. both variable and fixed manufacturing costs

b. variable manufacturing costs and variable selling and administrative expenses

c. variable manufacturing costs only

d. fixed manufacturing costs only

4. On an income statement prepared with a direct costing approach, the excess  of sales over the cost of goods, sold, based on variable costs only, is referred to as the:

A. marginal gross profit on sales

B. manufacturing margin

C. marginal income on sales

D. contribution margin

5. Fixed manufacturing costs are written off as current expenses  of the period in which they occurred when using_____ costing.

A. direct

B. standard

C. absorption

D. differential

6. Which inventory costing system is NOT acceptable for financial reporting purposes?

A Absorption costing

B. direct costing

C. Standard Costing

D. Variable Costing

7. Which of the following would NOT be relevant to a decision about whether to continue making a part or whether to  buy it from an outside source?

A. Alternative uses for the plant where the part was produced if the part is purchased.

B. A fee previously spent for a design of the part

C. The variable costs of making that part

D. The number of additional employees needed to make that part.

8. A company has sales of $100,000, ending finished goods inventory of $9,000 variable manufacturing costs of $50,000 and fixed manufacturing costs of $28,000 for the year. Assuming the company uses direct costing, the manufacturing margin for the year is $:

A. 22,000

B. 31,000

C. 59,000

D. 13,000

9. A segment of a business reported a contribution margin of $36,000 and controllable fixed costs of $12,000. If the segment had been eliminated, the company wide net income would have been $:

A. 12,000 higher

B. 24,000 lower

C.36,000 lower

D. 24,000 higher