Module 1 Quantitative Analysis Quiz :Accounting for Business Decision Making: Strategy Assessment and Control (Fundamentals of Accounting Specialization) Answers 2025

1. Capacity cost per tire using budgeted capacity basis

(Capacity cost total = $100,000; managers anticipate demand of 75,000 tires this year → budgeted capacity = 75,000.)

• ❌ $1.00 per tire

• ❌ $1.25 per tire

• ✅ $1.33 per tire

• ❌ $2.00 per tire

Explanation: $100,000 ÷ 75,000 tires = $1.333… → $1.33 per tire.

2. Rochelle Company — theoretical capacity

(Total cost = $200,000. Ignoring normal downtime cost-per-hour supplied = $2.00/hour.)

• ✅ 100,000 hours

• ❌ 90,000 hours

• ❌ 80,000 hours

• ❌ 75,000 hours

Explanation: Theoretical capacity = total cost ÷ cost/hour at theoretical supply = $200,000 ÷ $2.00 = 100,000 hours.

3. Rockford — statements about Products A and B (machine-time constrained)

Product data:
A: price $10, var $4 → CM = $6; machine time 0.5 hr → CM per machine-hour = $6 / 0.5 = $12/hr.
B: price $12, var $5 → CM = $7; machine time 0.75 hr → CM per machine-hour = $7 / 0.75 ≈ $9.33/hr.

• ❌ Product B is the most profitable product because it earns a higher contribution margin.
  (Misleading in a constrained setting — B has higher CM per unit but lower CM per machine-hour; with a machine-time constraint profitability should be judged per machine-hour.)

• ❌ Managers will prefer to sell Product A because it incurs lower variable costs.
  (Not the correct decision rule — preference depends on CM per constrained resource, not simply lower variable cost.)

• ✅ Product A earns $12 per machine hour.
  (True: $6 CM per 0.5 hr → $12/hr.)

• ❌ Managers will prefer to sell Product A because it uses less machine hours.
  (Using less time is not the full reason — preference is based on CM per machine-hour.)

• ❌ Product B earns $7 per machine hour.
  (False — $7 is CM per unit, not per machine-hour; per machine-hour ≈ $9.33.)

4. Mendota — which labor type is most constrained?

Available hours: specialized 17,000; general 19,000.

• ✅ Mendota’s most constrained labor type is specialized labor because it has fewer hours available.

• ❌ Mendota’s most constrained labor type is the general labor because both products use up general labor before they use up the specialized labor.

• ❌ Mendota’s most constrained labor type is the specialized labor because both products use up specialized labor before they use up the general labor.

Explanation: With no production mix given, the simplest fact we can rely on is available-hours comparison: specialized labor (17,000 hrs) is less than general (19,000 hrs), so specialized labor is the more limited resource.

5. El Paso — which statements are true?

Compute contribution margins and CM per constrained resource:

Deluxe: price $14 − var costs (materials $5 + labor $7) = CM = $2/unit.
Labor time 1 hr, machine time 2 hrs → CM per labor hour = $2/1 = $2/hr; CM per machine hour = $2/2 = $1/hr.

Ultimate: price $25 − var costs ($8 + $14) = CM = $3/unit.
Labor time 2 hrs, machine time 3 hrs → CM per labor hour = $3/2 = $1.50/hr; CM per machine hour = $3/3 = $1/hr.

Available: labor 2,000 hrs, machine 3,000 hrs → labor is scarcer (2,000 < 3,000).

• ❌ Managers will prefer the Ultimate model because it earns more per unit of the most constrained resource.
  (False — most constrained is labor; Deluxe earns $2 per labor-hr vs Ultimate $1.50.)

• ❌ Machine time is the most constrained resource.
  (False — machine hours available (3,000) > labor hours (2,000).)

• ✅ Managers will prefer the Deluxe model because it earns more per unit of the most constrained resource.
  (True — per labor-hour: Deluxe $2.00 > Ultimate $1.50.)

• ✅ Labor is the most constrained resource.
  (True — 2,000 labor hrs available vs 3,000 machine hrs.)

• ❌ Managers are indifferent between the two products because both earn the same contribution margin per unit.
  (False — CM per unit differs: Deluxe $2, Ultimate $3; and per constrained resource they differ too.)

🧾 Summary table