exam

Short Exam ACCT301

Name ……………………………………….ID………….…….

MCQ

Q1. Which one of the following decision’s general rule is based on keeping the business segment if its contribution margin covers its avoidable fixed costs?

a) Keep or drop decision

b) Special order decision

c) Make or buy decision

d) Constrained resource decision

Q.2 For manufacturers, outsourcing decisions are often known as

a. Make or buy

b. Routine

c. Constrained resource decisions

d. Special order decisions

Q.3 what is the role of supporting department?

a. produce production

b. provide services to the operating and other support departments.

c. Provide service

d. None of them

Q4. LT Ltd. makes plastic products. The normal selling price of the product is SAR 45 per unit. KK Company wants to purchase 10,000 units at SAR 30 from LT Ltd. The relevant costs of production per unit of the product produced by LT Ltd. are SAR 22. The incremental profit if company accepts the special order will be:

a) SAR 60,000

b) SAR 80,000

c) SAR 40,000

d) SAR 50,000

Q5. The following allocation method allocates some (but not all) support department costs to other support departments

a) Direct method

b) Step-down method

c) Reciprocal method

d) Stand-alone method

Q6. In the determination of make or buy decision, managers must choose the alternative with the:

a) Lowest relevant cost

b) Highest relevant cost

c) Contribution margin

d) Fixed cost

Short Answer (4 Marks)

ABC incorporation has two support departments, Administration department and Information Technology department and two operating departments, Assembly department and Finishing department. Company allocates administration costs on the basis of the number of employees and information technology cost on the basis of number of computers in each department. Given the information below, use the direct method to allocate support department costs.

Details

	Support Department	Operating Departments	Total
	Administration	Information Technology	Assembly	Finishing
Total department costs	$72,000	$108,000	$579,000	$273,000	$1,032,000
Number of employees	5	6	33	24	68
Number of computers	6	9	5	5	25
Answer: Fill in the below
Allocation of Costs
Administration			……..	……….	$0
Information Technology			…….	………..	$0
Totals	$0	$0			$1,032,000