K2 Short-term decision making

Which of these is a relevant cost for a decision?

• 1 A depreciation charge on existing equipment
• 2 A cost that has already been paid
• 3 A future cash flow that will change as a result of the decision
• 4 An overhead that will be incurred anyway

A job needs 100 kg of a material that is regularly used. It cost $5 a kg when bought. The replacement cost is $6 a kg. What is the relevant cost?

• 1 $500
• 2 $600
• 3 $100
• 4 $1,100

Workers have spare time and are paid whatever they do. What is the relevant cost of using them on a new job?

• 1 Nil
• 2 Their full wages
• 3 Their wages plus a bonus
• 4 Their wages plus overheads

Product X earns $12 contribution using 2 labour hours. Product Y earns $15 using 3 hours. Labour is the limiting factor. Which should be produced first?

• 1 X, because it earns $6 a hour
• 2 Y, because it earns $15 a unit
• 3 Y, because it uses more hours
• 4 Both equally

With 1,000 labour hours, demand for X of 300 units (2 hours each) and Y of 200 units (3 hours each), what is the maximum contribution? Use X $12 a unit and Y $15 a unit.

• 1 $5,600
• 2 $6,000
• 3 $6,600
• 4 $5,000

Product X earns $12 a unit using 2 labour hours and product Y earns $15 using 3 hours. There are 1,000 labour hours, demand for 300 units of X and 200 of Y, and the spare hours after making X go to Y. What is the shadow price of a labour hour?

• 1 $12
• 2 $6
• 3 $5
• 4 $15

The selling price is $40, the variable cost $24 and fixed costs $64,000. What is the break-even point in units?

• 1 1,600 units
• 2 6,000 units
• 3 2,667 units
• 4 4,000 units

The selling price is $40, the variable cost $24 and fixed costs $64,000. Budgeted sales are 5,000 units. What is the margin of safety?

• 1 25%
• 2 20%
• 3 4,000 units
• 4 80%

The selling price is $40, the variable cost $24 and fixed costs $64,000. How many units are needed for a profit of $32,000?

• 1 4,000 units
• 2 2,000 units
• 3 6,000 units
• 4 8,000 units