Exam 7: Incremental Analysis

Ace Company sells office chairs with a selling price of $45 and a contribution margin per unit of $20.It takes 5 machine hours to produce one chair.How much is the contribution margin per unit of limited resource?

When management has excess capacity available to it in the short run, which of the following would be the best path to follow?

It is better to process further rather than sell now if the sales price increases.

Sunk costs are considered relevant when choosing among alternatives because they are differential.

A company has a process that results in 1,000 kilograms of Product X that can be sold for $10 per kilogram.An alternative would be to process Product X further at a cost of $2,000 and then sell it for $13 per kilogram.Should management sell Product X now or should Product X be processed further and then sold?

A company should accept an order for its product at less than its regular sales price if the incremental revenue exceeds the incremental costs.

The book value of old equipment is an opportunity cost.

M&H Ltd.has sufficient capacity to fill an order at a special price below its usual price.The special price exceeds its variable costs.What non-financial factors should also be considered in the decision?

Which steps do accountants mostly contribute to in the decision-making process?

Which of the following statements about incremental analysis is true?

Decisions made using incremental analysis focus on the amounts which differ among the alternatives.

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

What is the key factor in performing incremental analysis if a company has limited resources?

Incremental costs are always relevant.

What is the nature of an opportunity cost?

Who prepares relevant revenue and cost data for the decision making process?

Which decision will involve no incremental revenues?

Incremental analysis identifies the probable effects of management decisions on future earnings.

The process used to identify the financial data that change under alternative courses of action is called incremental analysis.

How should that portion of fixed costs that are unavoidable be handled when making a decision on whether to eliminate an unprofitable segment?