4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

Topic 11 PRACTICE quiz - short term decision making

Due No due date
Points 19
Questions 19
Time limit None
Allowed attempts Unlimited

Instructions
Be sure to cover the Learning Content: textbook videos and interactive H5P activities - before you attempt
this practice quiz. You can attempt it as many times as you like.

Take the quiz again

Attempt history
Attempt Time Score
LATEST Attempt 1 10 minutes 8 out of 19

Submitted 30 Apr at 17:10

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Question 1
0 / 1 pts

Party Time, a small party supplies store, just spent $4,000 on a new software program that will help in
organising its inventory. Due to the steep learning curve required to use the new software, Party Time must
decide between hiring two part-time university students or one full-time employee.

Each university student would work 20 hours per week, and would earn $15 per hour. The full-time
employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in
sick and annual leave. Employees are given two polo shirts to wear as their uniform. The polo-shirts cost
Party Time $10 each.

What is the total relevant cost of the university student option?

You Answered
600

40 (with margin: 0)

The hourly wage is not relevant as it does not change between the two options.

The only 2 relevant costs are the sick/annual leave and polo shirts.

Total relevant costs = Leave (40hrs x $0/hr) + Shirts (2 x 2 per employee x $10)

= $40

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4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

Another way of displaying it is this table

Cost 2 x PTs 1 x FT Relevant

not?

Labour 20 x $15hr x 2 people 40 x $15hr NOT relev

Leave costs 40hrs x $0 per hour (because there 40hrs x $2 per hour = Relevant
is no leave paid) $80

Shirts 2 employees x 2 shirts x $10 = $40 1 employee x 2 shirts x Relevant

$10 = $20

TOTAL RELEVANT = $0 + $40 = $40 $80 + $20 = $100

COSTS

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Question 2
0 / 1 pts
Using the Party Time information above, what is the total relevant cost of the full time employee option?
You Answered

700

100 (with margin: 0)

The hourly wage is not relevant as it does not change between the two options.

The only 2 relevant costs are the sick/annual leave and polo shirts.

Total relevant costs = Leave (40hrs x $2/hr) + Shirts (2 x $10)

= $100

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Question 3
1 / 1 pts
Which options should Party Time choose if cost is the most important factor?
Correct!
2 part time university students

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4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

Single full time employee

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Question 4
1 / 1 pts

Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000
shelves for $32 each. Cut-rate Furniture approached Jansen about buying 1,200 shelves for bookcases it
is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen
usually packages shelves for Home Depot at a price of $1.50 per shelf. The $1.50 per-shelf cost is included
in the unit variable cost of $27, with annual fixed costs of $320,000. However, the $1.50 packaging cost will
not apply in this case. The fixed costs will be unaffected by the special order and the company has the
capacity to accept the order.

Based on this information, what would be the profit if Jansen accepts the special order?

Profits will increase by $31,200

Profits will decrease by $1,200
Correct!
Profits will increase by $600
Profits will increase by $7,200

The relevant items in this case are the sales price and the unit cost. The fixed costs are not relevant
because it remains the same regardless of whether we accept or reject the order.

The price is $26 per unit, for 1200 units = total revenue $31,200

The cost is $25.50 per unit. How did we come to that? The cost of $27 to make a regular produce LESS
the packaging cost of $1.50 that won't be needed for the special order. Total cost = $30,600

Net profit = revenue - cost = 31,200 - 30,600 = 600


Question 5
1 / 1 pts

Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for
$240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitri’s normal
variable cost is $165 per chair, including $50 per unit in direct labour per chair. Dimitri can produce the
special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the
normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not
disrupt any of Dimitri’s other operations.

What is the impact on profit (positive or negative)?

Correct!

16,000

16,000 (with margin: 0)

The revenue earned from the special order is $210 per chair x 800 chairs = $168,000

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4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

The cost per unit to manufacture is materials plus labour. The materials cost is $165-$50 = $115 per unit.
The labour cost is $50 x 1.5 = $75. Cost per unit = $115 + 75 = $190

Total costs = $190 x 800 chairs = $152,000

Impact on profit = $16,000

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Question 6
1 / 1 pts

BAPE make in-demand clothing. The business has capacity to make 15,000 hoodies a year and they sell
them for $375 each. The costs to make these hoodies includes $50 of materials, $10 of labour, $7 of
variable overhead, $2 of packaging costs and a fixed cost of $12. Currently, the business makes 14,000
hoodies and orders to existing retailers must be filled.

BAPE have been approached by Hawk Clothing (owned by skate legend Tony Hawk) for a collaboration to
make 2000 hoodies. For the special order, BAPE won't need to incur packaging costs because Hawk will
package all the hoodies. Hawk wishes to pay $250 per hoodie.

Which of the following options best describes the outcome of the situation described above.

BAPE will make additional profit of $612,000

BAPE will make additional profit of $588,000
BAPE will make additional profit of $366,000
Correct!
BAPE will reject the special order

Regardless of any costs - the first question we should always ask is whether there is the capacity to
accept the order.

In this instance, BAPE has unused capacity of only 1000 hoodies and therefore cannot accept an order for
2000 units.

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Question 7
0 / 1 pts

In the above scenario for BAPE, the business does some further investigation and believe that a
collaboration with Hawk will help improve the reach of their brand and potentially increase future sales.

The business decides to run an extra shift at the factory to produce these hoodies. Employees will be paid
double their regular pay for these shifts. Running the factory at night will also mean additional lighting costs
resulting in variable overhead cost of $10 per unit. An additional factory supervisor is also required for the
shift at a cost of $5000.

Assuming BAPE accepts the order and makes all of the hoodies in the extra shift, what is the amount of
profit that will be made on the special order?

You Answered
341,000

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4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

335,000 (with margin: 0)

Revenue $250 x 2000 units $500,000

Costs
Materials $50 x 2000 units $100,000

Labour $20 x 2000 units $40,000

Variable overhead $10 $20,000
Originally not relevant but now
Fixed overhead included as it applies to the extra $5,000
shift
Net profit Revenue - total costs $335,000
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Question 8
1 / 1 pts

BAPE has a range of hoodies, t-shirts and pants. They currently make their t-shirts and then apply designs
on them. To free up capacity to make more hoodies - the business is considering purchasing t-shirts from
an external supplier.

An external supplier will charge $18 per t-shirt.

BAPE has the following costs when they manufacture their t-shirts

Fabric - 1m2 at a cost of $10 per m2

Labour - 15 minutes at a cost of $20 per hour
Variable overhead - $2 per t-shirt
Fixed overhead of $20,000 which works out to $5 per t-shirt

If BAPE chooses to buy from an external supplier - they will still have to pay for the fixed overhead.

Using the quantitative information provided, should BAPE make or buy their t-shirts?

BAPE should buy t-shirts from the external supplier

Correct!
BAPE should make their t-shirts

The total cost per shirt is $22 - materials $10, labour $5, variable OH $2, fixed OH $5. However the fixed
overhead is NOT RELEVANT and should not be included.

This means the relevant cost per t-shirt is actually $17.

The cost to purchase is $18 - this is greater than the relevant cost. Therefore BAPE should continue to
manufacture their t-shirts.

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Question 9
0 / 1 pts
What is the total cost if BAPE purchases the t-shirts from the external supplier?
You Answered

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4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

92,000

23 (with margin: 0)

Since the fixed overhead will need to be paid anyway - the total cost of the t-shirt will be the purchase price
of $18 plus the fixed overhead of $5 = $23
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Question 10
0 / 1 pts
What is the total cost of BAPE making the t-shirts?
You Answered

88,000

22 (with margin: 0)

The total cost is all of the costs including the fixed cost/


Question 11
0 / 1 pts
What is the relevant cost of BAPE purchasing the t-shirts from the external supplier
You Answered
72,000

18 (with margin: 0)

It is the purchase cost. The fixed cost is not relevant since the business has to pay for this cost regardless.

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Question 12
0 / 1 pts
What is the relevant cost for BAPE making the t-shirts?
You Answered

68,000

17 (with margin: 0)

This is the cost of the materials, labour and variable overhead, but excludes the fixed overhead - it is not
relevant.


Question 13
1 / 1 pts

Using the BAPE example above, the supplier gets back in touch with the company after being told that the
company decided to continue manufacturing their t-shirts. The external supplier says that they can go
cheaper and offer the t-shirts for $16.

What should BAPE do?

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4/30/25, 12:40 PM Topic 11 PRACTICE quiz - short term decision making: 22108 Accounting and Accountability - Autumn 2025

Make their t-shirts

Correct!
Buy shirts from the external supplier

The buy price is now less than the relevant costs of $17 - therefore, they should buy their t-shirts from the
external supplier.
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Question 14
1 / 1 pts

Pikachu Advisory is an architectural drawing firm. They draw up residential housing plans based on
designs prepared by builders. On all of these plans, they must also add in information about any sewer
lines and property boundaries. This information comes from government databases.

Currently, Pikachu Advisory has a senior draftsperson prepare the house plans. The business then pays a
junior staff member $45 per hour to add in the sewer lines and boundaries. There is approximately 25
hours of this work completed each month.

Charmander Outsourcing provides architectural drawing firms with outsourced services and can provide
the same service for $15 per hour, however, they estimate that it will take them 30 hours to complete the
same volume of work.

If Pikachu Advisory outsources this work, they will not save on any of their fixed costs related to office
space, computers etc. However, Charmander Outsourcing does require every one of their clients to pay a
$600 monthly access charge.

What is the cost of outsourcing the work?

Correct!

1,050

1,050 (with margin: 0)

Cost of outsourcing = Variable cost + Fixed cost

= ($15 per hour x 30 hours) + 600

= $1050


Question 15
1 / 1 pts
Using the above information for Pikachu Advisory - should the business complete the work in-house or
outsource to maximise profit?
Correct!
Outsource the work
Complete the work in-house

The outsourced cost is $1050 and the in-house cost is $1125 ($45 per hour * 25 hours)

Therefore outsourcing is cheaper and will result in higher profit

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Question 16
0 / 1 pts

Party Supply is trying to decide whether or not to continue its costume segment. The information shown is
available for Party Supply’s business segments. Assume that neither the Direct fixed costs nor the
Allocated common fixed costs may be eliminated, but will be allocated to the two remaining segments.

Costumes Party Supplies Floral Decorations

Sales $160,000 $110,000 $210,000
Variable costs 84,000 50,000 120,000
Contribution margin 76,000 60,000 90,000
Direct fixed costs 50,000 20,000 25,000
Allocated common fixed
30,000 25,000 30,000
costs
Net income $(4,000) $15,000 $35,000

If costumes are dropped, what will be the Net Profit for Party Supply? If there is a Net Loss - please add a
negative sign in front of the number.

You Answered

15,000

-30,000 (with margin: 0)

The direct fixed costs and allocated costs will be incurred regardless of whether the Costumes department
is kept or dropped.

Under the current scenario - adding up all 3 departments - the business makes Sales of $480,000, Variable
costs of $254,000 resulting in Contribution Margin of $226,000.

There are the direct and allocated costs of $95,000 and $85,000. Subtracting these costs results in a profit
for Party Supply of $46,000.

However, if they drop the Costumes department - the business will not receive the Sales or incur the
Variable costs. BUT they will still incur the direct fixed and allocated costs. As you can see - if the business
DROPS the Costumes department - the overall impact will be a LOSS of $30,000

Party Floral
Costumes TOTAL
Supplies Decorations
Sales $110,000 $210,000 $320,000
Variable costs 50,000 120,000 $170,000
Contribution margin 60,000 90,000 $150,000
Direct fixed costs 50,000 20,000 25,000 95,000

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Allocated common fixed

30,000 25,000 30,000 85,000
costs
Net income $15,000 $35,000 ($30,000)
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Question 17
0 / 1 pts

Kagaya Tea Warehouse sells Japanese tableware items. They have limited shelf space and can only sell
one of these items.

Ramen bowls Tea sets

Budgeted sales (units) 500 200
Sales price per unit $10 $40
Purchase cost per unit $2 $20
Variable packaging cost per unit $1 $10
Fixed overhead $400 $400

Calculate the contribution margin for the ramen bowls

You Answered

3,500 (with margin: 0)

CM = Total revenue - Variable costs

= (500*10) - Purchase cost ($2 * 500) - Packaging ($1 * 500)

= $3500

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Question 18
0 / 1 pts
For the Kagaya Tea Warehouse - calculate the contribution margin for the Tea sets.
You Answered
10

2,000 (with margin: 0)

CM = Total revenue - Variable costs

= ($40 * 200 units) - Purchase cost ($20 * 200 units) - Packaging ($1 * 200 units)

= $2000

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Question 19
0 / 1 pts
Which product should the Kagaya Tea Warehouse sell?
Correct answer
Ramen bowls

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You Answered
Tea sets
I'm not sure

Even though the Ramen bowls have a lower Contribution Margin per unit ($10 - $2 - $1 = $7) compared to
the Tea sets ($40 - $20 - $10 = $10) - the sales volume of ramen bowls means that the total contribution
margin for ramen bowls is higher.

Total CM for Ramen bowls = $7 * 500 units = $3500

Total CM for Tea sets = $10 * 200 units = $2000

Therefore we should choose the option that provides the highest total contribution margin - the ramen
bowls

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