Question 1

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

Accepted Answer

A) the cost of the old equipment 
B) the salvage value of the old equipment 
C) the book value of the old equipment 
D) the accumulated depreciation of the old equipment 
A) the cost of the old equipment 
B) the salvage value of the old equipment 
C) the book value of the old equipment 
D) the accumulated depreciation of the old equipment

Question 2

Which one of the following is a true statement about incremental analysis?

Accepted Answer

A) It is another name for capital budgeting. 
B) It is the same as CVP analysis. 
C) It is used primarily for long-term planning. 
D) It focuses on decisions that involve a choice among alternative courses of action. 
A) It is another name for capital budgeting. 
B) It is the same as CVP analysis. 
C) It is used primarily for long-term planning. 
D) It focuses on decisions that involve a choice among alternative courses of action.

Question 3

In which situations should opportunity costs be considered?

Accepted Answer

A) decision making that involves alternative uses 
B) forecasting sales 
C) financial accounting 
D) breakeven analysis 
A) decision making that involves alternative uses 
B) forecasting sales 
C) financial accounting 
D) breakeven analysis

Question 4

When a company has limited resources to manufacture products, it should manufacture those products which have the highest contribution margin per unit.

Accepted Answer

A) True 
 B)False

Question 5

An opportunity cost is the potential benefit given up by using resources in an alternative course of action.

Accepted Answer

A) True 
 B)False

Question 6

Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?

Accepted Answer

A) Unit variable costs will increase. 
B) Fixed costs will not be relevant. 
C) Both variable and fixed costs will be relevant. 
D) The company should accept the order. 
A) Unit variable costs will increase. 
B) Fixed costs will not be relevant. 
C) Both variable and fixed costs will be relevant. 
D) The company should accept the order.

Question 7

Wishnell Toys can make 5,000 toy robots with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 74,000 \
\text { Direct Labour } & 30,000 \
\text { Variable Overhead } & 23,000 \
\text { Fixed Overhead } & 15,000
\end{array}$$ The company can purchase the 5,000 robots externally for $145,000.The avoidable fixed costs are $15,000 if the units are purchased externally.What is the cost savings if the company makes the robots?

Accepted Answer

A) $18,000 
B) $15,000 
C) $5,000 
D) $3,000 
A) $18,000 
B) $15,000 
C) $5,000 
D) $3,000

Question 8

Which of the following statements is true?

Accepted Answer

A) All variable costs are relevant costs. 
B) Only those variable costs that differ between alternatives are relevant costs. 
C) Fixed costs are never relevant costs. 
D) All fixed costs are relevant costs as they impact on overall unit costs. 
A) All variable costs are relevant costs. 
B) Only those variable costs that differ between alternatives are relevant costs. 
C) Fixed costs are never relevant costs. 
D) All fixed costs are relevant costs as they impact on overall unit costs.

Question 9

What is the salvage value of old equipment considered to be?

Accepted Answer

A) a relevant cost 
B) a non-incremental cost 
C) an opportunity cost 
D) a cost that is not differential 
A) a relevant cost 
B) a non-incremental cost 
C) an opportunity cost 
D) a cost that is not differential

Question 10

A company should eliminate any segment in which the contribution margin is less than the fixed costs that are unavoidable.

Accepted Answer

A) True 
 B)False

Question 11

SmartCard is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

Accepted Answer

A) Net income will decrease by the amount of the contribution margin of the product line being discontinued. 
B) The company's total fixed costs will increase. 
C) Total fixed costs will decrease by the amount of the product line's fixed costs. 
D) Net income will decrease by the amount of the product line's fixed costs. 
A) Net income will decrease by the amount of the contribution margin of the product line being discontinued. 
B) The company's total fixed costs will increase. 
C) Total fixed costs will decrease by the amount of the product line's fixed costs. 
D) Net income will decrease by the amount of the product line's fixed costs.

Question 12

In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

Accepted Answer

A) True 
 B)False

Question 13

A decision whether to continue to buy a product instead of producing it internally depends specifically on the incremental costs and incremental revenues of making the change.

Accepted Answer

A) True 
 B)False

Question 14

Which statement is true about relevant costs in incremental analysis?

Accepted Answer

A) All costs are relevant if they change between alternatives. 
B) Only fixed costs are relevant. 
C) Only variable costs are relevant. 
D) Relevant costs should be ignored. 
A) All costs are relevant if they change between alternatives. 
B) Only fixed costs are relevant. 
C) Only variable costs are relevant. 
D) Relevant costs should be ignored.

Question 15

Decision-making involves reviewing the results of a decision once the decision has been made.

Accepted Answer

A) True 
 B)False

Question 16

What is the nature of a sell or process further decision?

Accepted Answer

A) It is an incremental revenue decision. 
B) It is an incremental cost decision. 
C) It is both an incremental revenue and incremental cost decision. 
D) It is neither incremental revenue nor incremental cost. 
A) It is an incremental revenue decision. 
B) It is an incremental cost decision. 
C) It is both an incremental revenue and incremental cost decision. 
D) It is neither incremental revenue nor incremental cost.

Question 17

Which statement is true concerning the decision rule on whether to make or buy?

Accepted Answer

A) The company should buy if the cost of buying is less than the cost of producing. 
B) The company should buy if the incremental revenue exceeds the incremental costs. 
C) The company should buy as long as total revenue exceeds present revenues. 
D) The company should buy assuming no additional fixed costs are incurred. 
A) The company should buy if the cost of buying is less than the cost of producing. 
B) The company should buy if the incremental revenue exceeds the incremental costs. 
C) The company should buy as long as total revenue exceeds present revenues. 
D) The company should buy assuming no additional fixed costs are incurred.

Question 18

It costs Fortune Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35.A foreign wholesaler offers to purchase 1,000 scales at $16 each.Fortune would incur special shipping costs of $2 per scale if the order were accepted.Fortune has sufficient unused capacity to produce the 1,000 scales.If the special order is accepted, what will be the effect on net income?

Accepted Answer

A) $2,000 increase 
B) $2,000 decrease 
C) $3,000 decrease 
D) $15,000 increase 
A) $2,000 increase 
B) $2,000 decrease 
C) $3,000 decrease 
D) $15,000 increase

Question 19

A company is within plant capacity.It is contemplating whether a special order should be accepted.The order will not impact regular sales.If the company accepts a special order, what will occur?

Accepted Answer

A) Incremental costs will not be affected. 
B) Net income will increase if the special sales price per unit exceeds the unit variable costs. 
C) There are no incremental revenues. 
D) Both fixed and variable costs will increase. 
A) Incremental costs will not be affected. 
B) Net income will increase if the special sales price per unit exceeds the unit variable costs. 
C) There are no incremental revenues. 
D) Both fixed and variable costs will increase.

Question 20

When making a decision to accept a special order, management must consider

Accepted Answer

A) the impact that additional manufacturing time will have on unit costs of its current products. 
B) whether the purchaser will accept additional high costs of a special order. 
C) whether a lower price will convince the purchaser to become a regular customer. 
D) whether capacity exists to meet the demand of the order. 
A) the impact that additional manufacturing time will have on unit costs of its current products. 
B) whether the purchaser will accept additional high costs of a special order. 
C) whether a lower price will convince the purchaser to become a regular customer. 
D) whether capacity exists to meet the demand of the order.

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

Which one of the following is a true statement about incremental analysis?

In which situations should opportunity costs be considered?

When a company has limited resources to manufacture products, it should manufacture those products which have the highest contribution margin per unit.

An opportunity cost is the potential benefit given up by using resources in an alternative course of action.

Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?

Which of the following statements is true?

What is the salvage value of old equipment considered to be?

A company should eliminate any segment in which the contribution margin is less than the fixed costs that are unavoidable.

SmartCard is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

A decision whether to continue to buy a product instead of producing it internally depends specifically on the incremental costs and incremental revenues of making the change.

Which statement is true about relevant costs in incremental analysis?

Decision-making involves reviewing the results of a decision once the decision has been made.

What is the nature of a sell or process further decision?

Which statement is true concerning the decision rule on whether to make or buy?

A company is within plant capacity.It is contemplating whether a special order should be accepted.The order will not impact regular sales.If the company accepts a special order, what will occur?

When making a decision to accept a special order, management must consider

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

Activity-Based Costing

Decision-Making: Costvolumeprofit

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 7: Incremental Analysis

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

Which one of the following is a true statement about incremental analysis?

In which situations should opportunity costs be considered?

When a company has limited resources to manufacture products, it should manufacture those products which have the highest contribution margin per unit.

An opportunity cost is the potential benefit given up by using resources in an alternative course of action.

Canosta, Inc.determined it must expand its capacity to accept a special order.Which situation is likely?

Which of the following statements is true?

What is the salvage value of old equipment considered to be?

A company should eliminate any segment in which the contribution margin is less than the fixed costs that are unavoidable.

SmartCard is considering eliminating one of its product lines.The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance.What financial effects occur if the product line is discontinued?

In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

A decision whether to continue to buy a product instead of producing it internally depends specifically on the incremental costs and incremental revenues of making the change.

Which statement is true about relevant costs in incremental analysis?

Decision-making involves reviewing the results of a decision once the decision has been made.

What is the nature of a sell or process further decision?

Which statement is true concerning the decision rule on whether to make or buy?

A company is within plant capacity.It is contemplating whether a special order should be accepted.The order will not impact regular sales.If the company accepts a special order, what will occur?

When making a decision to accept a special order, management must consider

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

Activity-Based Costing

Decision-Making: Costvolumeprofit

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters