Management Accounting: Test 1
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91 Terms
Financial reports prepared by financial accountants focus on ________. Financial reports prepared by management accountants focus on ________.
A.
segments of the organization such as departments and divisions; the organization as a whole
B.
the organization as a whole; segments of the organization such as departments and divisions
C.
segments of the organization such as departments and divisions; segments of the organization such as departments and divisions
D.
the organization as a whole; the organization as a whole
B.
the organization as a whole; segments of the organization such as departments and divisions
What is lean manufacturing?
A.
continuous process improvements to eliminate waste from the entire enterprise
B.
reducing the time products spend in the production process
C.
eliminating the time products spend in activities that do not add value
D.
reducing the amount of inventories by ordering raw materials only when needed and making products only when ordered by customers
A.
continuous process improvements to eliminate waste from the entire enterprise
When designing an accounting information system, the cost to acquire additional information should be incurred ________.
A.
at all times because the benefit cannot be quantified
B.
at all times so the operating manager has more information to make decisions
C.
when information overload does not occur
D.
when the expected benefit of an improved decision exceeds the cost of the information
D.
when the expected benefit of an improved decision exceeds the cost of the information
Starbucks experiments with adding ice cream sundaes to its menu at several stores in the state of Washington Financial reports are prepared showing revenues and costs for the new menu item. Based on the reports, management at the corporate office will then decide whether to permanently add or remove the new menu item. The financial reports are an example of ________ information.
A.
problem−solving
B.
scorekeeping
C.
management auditing
D.
attention directing
A.
problem−solving
To evaluate managers' decisions and the productivity of organizational units, organizations use ________.
A.
performance reports
B.
bimonthly financial statements
C.
quarterly financial statements
D.
annual financial statements
A.
performance reports
Which of the following items should be considered by managers when designing accounting systems?
A.
behavioral implications
B.
cost−benefit
balances and behavioral implications
C.
cost−benefit
balances
D.
none of the above
B.
cost−benefit
balances and behavioral implications
Accountants play a role in supporting ________ of the value−chain functions.
A.
none
B.
about half
C.
some
D.
all
D.
all
________ information helps managers focus on operating problems, imperfections, inefficiencies and opportunities.
A.
Problem solving
B.
Attention directing
C.
Performance
D.
Scorekeeping
B.
Attention directing
Why do changes in business process management affect management accounting?
A.
Management accountants are experts in designing plant layout changes.
B.
Management accountants specialize in designing manufacturing cells to streamline production processes.
C.
They all affect the number of workers employed and management accountants are involved in human resources.
D.
They all affect product costs and management accountants measure product costs.
D.
They all affect product costs and management accountants measure product costs.
The IMA's ethical standard for confidentiality includes all of the following EXCEPT ________.
A.
refrain from using confidential information for unethical or illegal advantage
B.
refrain from engaging in any conduct that would prejudice carrying out duties ethically
C.
inform all relevant parties regarding appropriate use of confidential information. Monitor subordinates' activities to ensure compliance
D.
keep information confidential except when disclosure is authorized or legally required
B.
refrain from engaging in any conduct that would prejudice carrying out duties ethically
The Institute of Management Accountants has adopted a set of standards for ethical conduct which includes ________.
A.
competence, integrity, morality and confidentiality
B.
competence, integrity, confidentiality and objectivity
C.
competence, confidentiality, credibility and objectivity
D.
competence, confidentiality, credibility and integrity
D.
competence, confidentiality, credibility and integrity
What type of managers is directly involved with making and selling an organization's products?
A.
line managers
B.
accounting managers
C.
management accountants
D.
staff managers
A.
line managers
A favorable variance occurs on a performance report when ________.
A.
the actual revenue is less than the budgeted revenue
B.
the actual cost is greater than the budgeted cost
C.
the actual profit is greater than the budgeted profit
D.
the actual profit is less than the budgeted profit
C.
the actual profit is greater than the budgeted profit
Which credential is associated with management accountants?
A.
IMA
B.
CFP
C.
CMA
D.
CPA
C.
CMA
FORMULA
Contribution Margin (CM)
total sales - total variable costs
FORMULA
Contribution Margin per Unit
sales per unit - variable costs per unit
FORMULA
Contribution Margin Ratio
total sales - total variable costs / total sales
OR
sales per unit - variable costs per unit / sales per unit
FORMULA
Net Income
total sales - total variable costs - total fixed costs
FORMULA
Breakeven using CM in UNITS
fixed expenses / unit contribution margin
FORMULA
Breakeven using CM in SALES
fixed expenses / contribution margin ratio
FORMULA
Target Profit aka how to find how many units need to be sold to meet the target profit
fixed costs + target profit
--------
CM per unit
FORMULA
Target Profit aka how to find how many sales needed to generate target profit
fixed costs + target profit
--------
CM ratio
FORMULA
Target Profit when considering Tax Effects (units)
fixed costs + target profit / 1 - tax rate
------
CM per unit
FORMULA
Target Profit when considering Tax Effects (sales)
fixed costs + target profit / 1 - tax rate
------
CM ratio
FORMULA
Margin of Safety (sales)
planned sales - breakeven sales
FORMULA
Margin of Safety (units)
planned units sold - breakeven sales units
FORMULA
Gross Margin (Gross Profit)
total sales - cost of goods sold
FORMULA
Pre-Tax Income
after-income tax / 1 - tax rate
FORMULA
After-Tax Income
(fixed costs + pre-income tax) / CM ratio
FORMULA
Contribution Margin Percentage
CM x Revenue (or net sales)
With mixed costs, the ________ element is unchanged over the relevant range and the ________ element varies proportionately with cost−driver activity.
A.
fixed cost; variable cost
B.
variable cost; fixed cost
C.
fixed cost; step cost
D.
step cost; variable cost
A.
fixed cost; variable cost
As the cost−driver level increases in the relevant range, variable costs per unit of cost driver ________ but total variable costs ________.
A.
increase; do not change
B.
decrease; do not change
C.
do not change; increase in direct proportion to the cost−driver activity level
D.
do not change; decrease in direct proportion to the cost−driver activity level
C.
do not change; increase in direct proportion to the cost−driver activity level
What happens when the cost−driver activity level decreases within the relevant range?
A.
Total fixed costs increase.
B.
Fixed costs per unit of cost driver decrease.
C.
Variable costs per unit of cost driver are unchanged.
D.
Total variable costs increase.
C.
Variable costs per unit of cost driver are unchanged.
If the selling price per unit increases, what is the effect on the break−even point? (Assume no other changes.)
A.
The break−even point increases.
B.
The break−even point decreases.
C.
The break−even point remains the same.
D.
The break−even point is zero.
B.
The break−even point decreases.
Gnat Company, a producer of electronic devices, has the following information:
Selling price per unit
$5.00
Variable cost per unit
$3.00
Total fixed costs
$90,000.00
The contribution−margin ratio is ________.
A.
60%
B.
100%
C.
30%
D.
40%
D.
40%
A compensation plan where the sales force is paid salary plus commission is a ________.
A.
fixed cost
B.
purely variable cost
C.
step cost
D.
mixed cost
D.
mixed cost
The following information is available for Kinsner Corporation:
Total fixed costs
$313,500
Variable cost per unit
$99
Selling price per unit
$154
If management has a targeted net income of $46,200, then the number of units that must be sold is ________.
A.
2,036 units
B.
2,336 units
C.
6,540 units
D.
5,700 units
C.
6,540 units
Contribution margin is equal to ________.
A.
sales minus variable production costs
B.
sales minus fixed costs
C.
sales minus variable costs
D.
sales minus production costs
C.
sales minus variable costs
Assume the following information for Rodney Company:
Selling price per unit - $100
Variable cost per unit - $80
Total fixed costs - $80,000
After−tax net income - $24,000
Tax rate - 40%
To achieve the targeted after−tax net income, what amount of sales in dollars is necessary?
A.
$400,000
B.
$660,000
C.
$600,000
D.
$520,000
C.
$600,000
Worbel Company has variable costs of $5 per unit and a selling price of $10 per unit. Fixed costs are $100,000. Planned unit sales for 2015 are 25,000 units. Actual unit sales for 2014 were 22,000. What is the margin of safety in dollars for 2015?
A.
$30,000
B.
$50,000
C.
$20,000
D.
$5,000
B.
$50,000
Cost drivers are ________.
A.
measures of activities that require the use of resources and thereby cause costs
B.
different types of cost calculations
C.
the different functions in the value chain
D.
different types of functional areas in the firm
A.
measures of activities that require the use of resources and thereby cause costs
Assume the following information for two products, Hawaii Fantasy and Hawaii Joy.
Hawaii Fantasy:
Sales Mix - 2 units
Selling price per unit - $15
Variable costs per unit - $10
Hawaii Joy
Sales Mix - 1 units
Selling price per unit - $100
Variable costs per unit - $40
Fixed expenses total $490,000 per year. What is the breakeven point in units for each product?
A.
18,300 units of Hawaii Fantasy and 4,575 units of Hawaii Joy
B.
14,000 units of Hawaii Fantasy and 7,000 units of Hawaii Joy
C.
4,575 units of Hawaii Fantasy and 18,300 units of Hawaii Joy
D.
7,000 units of Hawaii Fantasy and 14,000 units of Hawaii Joy
B.
14,000 units of Hawaii Fantasy and 7,000 units of Hawaii Joy
Which of the following is NOT an underlying assumption of cost−volume−profit analysis?
A.
In multiproduct companies, sales mix will be constant.
B.
The inventory level changes significantly during the period.
C.
We can classify expenses into fixed and variable categories.
D.
Revenues and expenses are linear over the relevant range.
B.
The inventory level changes significantly during the period.
The following information is available for Company ZZ:
Sales - $1,000,000
Variable Selling Expenses - 22,000
Fixed Selling Expenses - 33,000
Variable Administrative Expenses - 30,000
Fixed Administrative Expenses - 10,000
Variable Cost of Goods Sold - 400,000
Fixed Cost of Goods Sold - 100,000
If sales increase to $1,500,000, what is operating income?
A.
$405,000
B.
$500,000
C.
$679,000
D.
$548,000
C.
$679,000
FORMULA
Variable Cost per Unit
High Total Cost - Low Total Cost / High Units - Low Units
(High/Low) Total Cost = M x (High/Low Units) + B
FORMULA
Variable Expense Percentage
change in expenses / change in revenues
FORMULA
Variable Expenses
total revenue x variable expense %
FORMULA
Indifference Level (in orders)
difference in fixed costs - difference in variable costs per order
In relation to a cost function, the term reliability means ________.
A.
how well the cost function predicts future costs
B.
whether the cost function conforms to a given mathematical model
C.
how well the cost function explains past cost behavior
D.
whether the costs and activities can be easily observed
C.
how well the cost function explains past cost behavior
Direct labor cost is the primary cost driver of support costs for two products. Product One has direct labor costs of $8.50 per unit and Product Two has direct labor costs of $130 per unit. The support costs assigned to each product is the direct labor cost times five. What is the support cost assigned to Product One and Product Two?
Product One Product Two
A. $8.50 $130
B. $5.00 $76.47
C. $5.00 $26.00
D. $42.50 $650
The process of identifying appropriate cost drivers and their effects on the costs of making a product or providing a service is called ________.
A.
product analysis
B.
activity analysis
C.
account analysis
D.
cost analysis
B.
activity analysis
With the high−low method, the most accurate way to measure the intercept and slope for a cost function is to ________.
A.
plot the data points, identify the high and low points and draw a line between the high and low points
B.
plot the data points and draw a line
C.
use algebra using the two data points with the highest and lowest activity levels
D.
plot the data points and draw a straight line through the points as close as possible to all the points
C.
use algebra using the two data points with the highest and lowest activity levels
Presented below is the production data for six months of the year showing the mixed costs incurred by Kennedy Company.
Month Cost Units
July $6,000 4,000
August $10,250 6,500
September $10,500 8,000
October $12,700 10,500
November $14,000 12,000
December $10,850 9,000
Kennedy Company uses the high−low method to analyze mixed costs. The total fixed cost is ________.
A.
$2,000
B.
$10,500
C.
$10,417
D.
$4,500
A.
$2,000
Knowledge about the behavior of different costs in a service department such as maintenance can be used to ________.
A.
provide feedback to managers
B.
plan costs
C.
make decisions about the most efficient use of resources
D.
all of the above
D.
all of the above
Sheboygan Motel's cost function is given as:
Y = $120,000 + $2.50X
Where:
Y = annual custodial cost
X = number of guest−days of occupancy
In the current year, Sheboygan Motel has 8,000 guest days. In the next year, Sheboygan Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain in the same relevant range as the current year.) What is the expected total custodial cost for next year?
A.
$145,000
B.
$125,000
C.
$37,000
D.
$120,000
A.
$145,000
The fixed costs required to achieve a desired level of production or to provide a desired level of service, while maintaining product or service attributes, are ________.
A.
capacity costs
B.
step costs
C.
discretionary fixed costs
D.
committed fixed costs
A.
capacity costs
Presented below is the production data for six months showing the mixed costs incurred by Anderson Company.
Month Cost Units
July $5,890 4,100
August $4,012 3,200
September $7,480 6,300
October $9,000 7,500
November $5,800 5,800
December $7,336 6,600
Anderson Company uses the high−low method to analyze mixed costs. The cost function is ________ where Y= Total Cost and X= Number of units.
A.
Y = $7,850 + $0.132X
B.
Y = $440 + $1.12X
C.
Y = $440 + $1.20X
D.
Y = $300 + $1.16X
D.
Y = $300 + $1.16X
The high−low method can be used to approximate a cost function. A disadvantage of this method is ________.
A.
it makes inefficient use of information because it does not use all the available data
B.
it is difficult to apply due to rigorous calculations
C.
it takes a long time to measure a cost function
D.
it is very costly to use
A.
it makes inefficient use of information because it does not use all the available data
In an economic downturn, a company could temporarily reduce or eliminate a(n) ________.
A.
lease payments on computers in corporate headquarters
B.
public relations department
C.
insurance on factory building
D.
property taxes on factory building
B.
public relations department
Consider the following linear mixed−cost function:
Y = $120,000 + $2.70X
Where:
Y = total annual maintenance cost
X = number of patient−days
What does the $120,000 represent?
A.
fixed cost per patient−day
B.
total fixed cost
C.
variable cost per patient−day
D.
total variable cost
B.
total fixed cost
In an economic downturn, a company could temporarily reduce or eliminate a(n) ________.
A.
employee training program
B.
salaries of key personnel
C.
lease payment
D.
insurance on corporate offices
A.
employee training program
In target costing, managers design a product so that the product's cost does not exceed ________.
A.
the product's target cost
B.
the product's production costs
C.
the product's nonproduction costs
D.
the product's production and nonproduction costs
A.
the product's target cost
Relevant information refers to ________ that will differ among the alternative courses of action.
A.
future costs and revenues
B.
past costs and revenues
C.
future revenues only
D.
future costs only
A.
future costs and revenues
________ is the additional cost resulting from producing and selling one additional unit.
A.
Marginal cost
B.
Common cost
C.
Opportunity cost
D.
Target cost
A.
Marginal cost
Missouri Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.60 per unit and fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. Gates Company has contacted Missouri Company about purchasing 20,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. If the order is accepted, what is Missouri Company's change in profits?
A.
$8,000 decrease
B.
$10,000 decrease
C.
$10,000 increase
D.
$8,000 increase
D.
$8,000 increase
Discriminatory pricing occurs when a firm sets ________.
A.
different prices for a product in different regions of the United States due to a cost differential in providing the product
B.
prices below their competitors' prices
C.
different prices for different customers for the same product or service
D.
discounts for all customers if they pay within a certain number of days after purchase
C.
different prices for different customers for the same product or service
When managers make decisions, the decision process used has the following steps in the order of occurrence:
A.
Historical and Other Information, Decision Model, Prediction Method, Implementation, Decision, Feedback
B.
Historical and Other Information, Decision Model, Prediction Method, Decision, Implementation, Feedback
C.
Historical and Other Information, Prediction Method, Prediction, Decision Model, Decision, Implementation, Feedback
D.
Historical and Other Information, Prediction Model, Prediction, Decision Model, Decision, Implementation, Feedback
C.
Historical and Other Information, Prediction Method, Prediction, Decision Model, Decision, Implementation, Feedback
Using absorption costing, the primary classifications of costs on the income statement are by ________.
A.
manufacturing departments
B.
manufacturing segments
C.
major management functions
D.
cost behavior patterns
C.
major management functions
The contribution approach to the income statement emphasizes the distinction between ________.
A.
different business segments
B.
different functional areas in a firm
C.
value chain functions
D.
variable and fixed costs
D.
variable and fixed costs
Latinovich Company has no beginning and ending inventories, and reports the following data about its only product:
Direct materials used - $200,000
Direct labor - $80,000
Fixed indirect manufacturing - $180,000
Fixed selling and administrative - $150,000
Variable indirect manufacturing - $130,000
Variable selling and administrative - $160,000
Selling price(per unit) - $150
Units produced and sold - 10,000
Latinovich Company uses the contribution approach to prepare the income statement. What is the contribution margin?
A.
$930,000
B.
$600,000
C.
$910,000
D.
$1,090,000
A.
$930,000
Michigan Company has budgeted the following costs for the production of its only product:
Direct Materials - $35,000
Direct Labor - 25,000
Variable indirect production costs - 30,000
Fixed indirect production costs - 15,000
Variable selling and administrative costs - 7,500
Fixed selling and administrative costs - 12,500
Total Costs - $125,000
Michigan Company wants a profit of $50,000, and expects to produce 1,000 units. The market price is $150 per unit. What is the target cost per unit of the product?
A.
$125 per unit
B.
$100 per unit
C.
$175 per unit
D.
$150 per unit
B.
$100 per unit
When evaluating short−term special order decisions, which of the following types of income statements should be used?
A.
absorption approach
B.
method that follows U.S. Generally Accepted Accounting Principles
C.
method used for external reporting
D.
contribution approach
D.
contribution approach
Which product cost is irrelevant to the decision?
- Direct Materials 1
- Direct Materials 2
- Direct Materials 3
- Direct Labor
Direct Labor
Butters Company has budgeted sales of $30,000 with the following budgeted costs:
Direct materials - $6,300
Direct labor - $4,100
Variable factory overhead - $3,700
Fixed factory overhead - $5,600
Variable selling and administrative costs - $2,400
Fixed selling and administrative costs - $3,200
What is the average target markup percentage for setting prices as a percentage of total manufacturing costs?
A.
61%
B.
52%
C.
34%
D.
none of the above
B.
52%
When manufacturing multiple products that are not initially separately identifiable, manufacturing costs incurred after the split−off point are known as ________ costs.
A.
joint
B.
separable
C.
product
D.
split−off
B.
separable
If a department in a department store is under consideration to be eliminated, unavoidable fixed expenses are ________ to the decision.
A.
incremental
B.
relevant
C.
irrelevant
D.
marginal
C.
irrelevant
Incremental costs are the ________ generated by a proposed alternative.
A.
additional revenues
B.
reduced costs
C.
additional costs or reduced revenues
D.
additional revenues or reduced costs
C.
additional costs or reduced revenues
The most recent income statement for the South Branch of First Financial Bank is presented below:
Sales $57,000
Variable costs 31,500
Contribution margin 25,500
Avoidable fixed costs 13,500
Unavoidable fixed costs 18,000
Operating loss $(6,000)
First Financial Bank is thinking about eliminating the South Branch. If the branch is eliminated, First Financial Bank's operating income will ________.
A.
decrease by $12,000
B.
decrease by $31,500
C.
increase by $6,000
D.
increase by $25,500
A.
decrease by $12,000
Blue Company is a small company with limited expertise with customer service. Blue Company has a contract with New Company to handle all of Blue Company's customer service needs. For Blue Company, this is an example of ________.
A.
outsourcing
B.
technology osmosis
C.
technology transfer
D.
none of the above
A.
outsourcing
If a department in a department store is eliminated, ________ costs will not continue.
A.
avoidable
B.
corporate
C.
unavoidable
D.
common
A.
avoidable
In make−or−buy decisions for a part for a product, relevant costs include ________.
A.
some variable costs of making the part
B.
all variable costs of making the part
C.
fixed costs that can be avoided in the future if the part is purchased
D.
B and C
D.
B and C
If demand is the limiting factor, and there are no other scarce resources, managers should emphasize the product with ________.
A.
the highest selling price per unit
B.
the highest contribution margin per hour
C.
the lowest variable costs per unit
D.
the highest contribution margin per unit
D.
the highest contribution margin per unit
The key to determining the financial difference between two alternative courses of action is to identify the ________.
A.
differential costs and revenues
B.
joint cost of both alternatives
C.
marginal cost
D.
opportunity cost of each alternative
A.
differential costs and revenues
BEE Company is considering the replacement of a machine that is presently used in production. Which of the following items are irrelevant to the replacement decision?
A.
original cost of old machine
B.
original cost of the new machine
C.
annual operating cost of the old machine (2 years left)
D.
disposal value of the old machine at time of replacement
A.
original cost of old machine
Central Industries has three product lines: A, B and C. The following information is available:
Product A Product B Product C
Sales $100,000 $90,000 $44,000
Variable costs 76,000 48,000 35,000
Contribution margin 24,000 42,000 9,000
Avoidable fixed costs 9,000 18,000 3,000
Unavoidable fixed costs 6,000 9,000 7,700
Operating income(loss) $9,000 $15,000 $(1,700)
Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C and does not replace it. What will happen to operating income?
A.
increase by $2,400
B.
decrease by $9,000
C.
increase by $600
D.
decrease by $6,000
D.
decrease by $6,000
Gray Lake Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000 −
Disposal value now $8,000 −
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
Adding all five years together, the total relevant costs to consider if the old machine is not replaced is ________.
A.
$22,000
B.
$35,000
C.
$39,000
D.
$31,000
B.
$35,000
When choosing between two alternatives, what of the following are relevant costs?
A.
future variable costs that are the same under two alternatives
B.
future variable costs that are different under two alternatives
C.
future fixed costs that are different under two alternatives
D.
B and C
D.
B and C
Mayfair Corporation has a joint process that produces three products: P, G and A. Each product may be sold at split−off or processed further and then sold. Joint−processing costs for a year amount to $15,000. Other data follows:
Sales Value Product at Split−Off
P - 62,000
G - 12,500
A - 9,400
Separable Processing Costs after Split−Off
P - 5,000
G - 6,500
A - 5,000
Sales Value at Completion
P - 88,000
G - 19,500
A - 12,000
Processing Product G beyond the split−off point will cause profits to ________.
A.
increase by $1,000
B.
increase by $7,000
C.
be unchanged
D.
increase by $500
D.
increase by $500
A company can sell any mix of Product A and Product B at full capacity. The company has 100,000 hours of capacity. The demand for each product exceeds the capacity. It takes one hour to make one unit of Product A and two hours to make one unit of Product B. The following information is available:
Units produced from capacity available :
Product A - 100,000
Product B - 50,000
Contribution margin per unit
Product A - $20
Product B - $30
If capacity is the limiting factor, which product should be produced?
A.
100,000 units of Product A and 0 units of Product B
B.
0 units of Product A and 50,000 units of Product B
C.
30,000 units of Product A and 20,000 units of Product B
D.
20,000 units of Product A and 30,000 units of Product B
A.
100,000 units of Product A and 0 units of Product B
Christian Company manufactures a part for its production cycle. The annual costs per unit for 5,000 units of the part are as follows:
Per Unit
Direct materials - $3.00
Direct labor - 5.00
Variable factory overhead - 4.00
Fixed factory overhead - 2.00
Total costs - $14.00
The fixed factory overhead costs are unavoidable. Another company has offered to sell 5,000 units of the same part to Christian Company for $15 per unit. The facilities currently used to make the part could be rented out to another manufacturer for $20,000 a year. Christian Company should ________.
A.
make the part to save $5,000
B.
buy the part and rent facilities to save $15,000
C.
make the part to save $15,000
D.
buy the part and rent facilities to save $5,000
D.
buy the part and rent facilities to save $5,000
Nancy Company has an idle machine that originally cost $200,000. The book value of the machine is $100,000. The company is considering three alternative uses of the idle machine:
Alternative 1: Disposal of machine. Disposal value of machine is $50,000.
Alternative 2: Use the idle machine to increase production of Product A. Contribution margin from additional sales of Product A is estimated to be $60,000.
Alternative 3: Use the idle machine to increase production of Product B. Contribution margin from additional sales of Product B is estimated to be $70,000.
When considering the opportunity cost of the idle machine, what is the net financial benefit from Alternative 3?
A.
$70,000
B.
$20,000
C.
$10,000
D.
$50,000
C.
$10,000
Note 
Flashcards (23)