Exam 21: Incremental Analysis

A cost that has already been incurred and cannot be changed is called a(n):

The most common method to allocate joint costs is in proportion to the relative sales value of the products.

When faced with a limited availability of machine-hours, management should consider producing those products which:

The split-off point is the point at which joint products can be separated into two or more products.

The net change in operating income resulting from a decision to manufacture MB-2 is (specify whether the change is an increase or a decrease): $_____________

The cost of draining sap out of a maple tree to manufacture maple syrup and maple sugar is an example of:

Sunk costs may be defined as unavoidable future costs resulting from past decisions.

Direct material costs are always considered relevant costs in a make or buy decision.

Sunk costs have already been incurred and cannot be changed by future actions.

On the basis of the above information only, which of the following is not true?

Differential analysis is a tool for evaluating alternative courses of action always resulting in higher profits for the organization.

Assume that seats can be purchased from the outside supplier at $25 each, and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy. Buying the seats instead of manufacturing them would cause Perry's operating income to:

All incremental revenue or incremental costs are relevant.

The Magic Microbrewery has a limited amount of vat capacity available in which it can ferment beer. In deciding which beers to brew, Magic management should consider:

If Creative Corporation has only 250,000 square yards of wood available, what is the highest total amount of fixed cost the company can incur and still break-even?

Which of the following costs is generally considered irrelevant in incremental analysis?

Johnson produces 7,000 skateboards each month, which it sells for $60 each. Variable costs are $25 per unit, and fixed costs are $95,000 per month. A Canadian company has offered to buy an additional 1,000 skateboards for $30 per unit. Assuming that normal sales volume and fixed costs remain unchanged, filling this special order will cause Johnson's operating income to:

Joint costs are the middle costs of a product.

The net change in operating income resulting from a decision to manufacture product A2 is:

In deciding whether to accept this special order from Computer Marketing Corp., Phoenix should be least concerned with: