Question 1

Opportunity costs are irrelevant in decision making.

Accepted Answer

A) True 
 B)False

Question 2

Products resulting from a shared manufacturing process are

Accepted Answer

A) True 
 B)False

Question 3

Widmark Company originally made cell phones at a cost of $60,000 that have since become obsolete due to new technology.They can sell the phones to a dealer for scrap for $11,500 or put more work into them to bring them up-to-date.To re-do the phones would cost $13,000 and they then could be sold for $20,000.
(A.)Should the company scrap them or rework them? (show calculations)
(B.)If the original cost had been $50,000 and the company could now sell the phones for $25,000 what should Heston do?

Accepted Answer

(A.) @#IMG-DLM& Decision-The company should scrap

Question 4

Links,Inc.produces golf gloves.The gloves sell for $16 each.Variable costs are $8.50 and fixed costs are $1.50 each.An Australian company has offered to pay $12 each for 2,000 gloves.The manufacturing capacity will not be affected by this special order and it will not affect regular sales.Fixed assets will not change but variable selling costs will increase by $1.75 a glove due to delivery costs.
(a)What is the relevant cost per unit on this special order?
(b)How will company profits be affected?
(c)Should the company accept this special order?

Accepted Answer

(a)Costs = $10.25 (b

Question 5

The relevant costs and revenues to consider in a special order decision include variable costs,fixed costs,and incremental revenues.

Accepted Answer

A) True 
 B)False

Question 6

Opportunity costs are recorded in the accounting records.

Accepted Answer

A) True 
 B)False

Question 7

Incremental revenue is relevant in decision making.

Accepted Answer

A) True 
 B)False

Question 8

A decision to discontinue a given product on the basis of contribution margin data should include consideration of the probable impact of the discontinuance on the sales of other products.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Joint costs are the middle costs of a product.

Accepted Answer

A) True 
 B)False

Question 11

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:

Accepted Answer

A) The contribution margins of the individual beers. 
B) The unit contribution margins of the individual beers. 
C) The contribution margin ratios of the individual beers. 
D) The contribution margin per unit of vat capacity of the individual beers. 
A) The contribution margins of the individual beers. 
B) The unit contribution margins of the individual beers. 
C) The contribution margin ratios of the individual beers. 
D) The contribution margin per unit of vat capacity of the individual beers.

Question 12

In order to be consistent with IASB Standards,U.S.GAAP now requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be expensed immediately.

Accepted Answer

A) True 
 B)False

Question 13

Products for which sales of one contribute to the sales of another are called:

Accepted Answer

A) Complementary products. 
B) Competing products. 
C) Contributory products. 
D) Codependent products. 
A) Complementary products. 
B) Competing products. 
C) Contributory products. 
D) Codependent products.

Question 14

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

Accepted Answer

A) After-split-off costs. 
B) Sunk costs. 
C) Incremental costs. 
D) Joint costs. 
A) After-split-off costs. 
B) Sunk costs. 
C) Incremental costs. 
D) Joint costs.

Question 15

Incremental revenues:

Accepted Answer

A) Always increase revenue when one course of action is selected over another. 
B) Always decrease revenue when one course of action is selected over another. 
C) May increase or decrease when one course of action is selected over another. 
D) Cause revenues to remain steady. 
A) Always increase revenue when one course of action is selected over another. 
B) Always decrease revenue when one course of action is selected over another. 
C) May increase or decrease when one course of action is selected over another. 
D) Cause revenues to remain steady.

Question 16

In determining whether to scrap or to rebuild defective units of product,the cost already incurred in producing the defective units is not relevant.

Accepted Answer

A) True 
 B)False

Question 17

Incremental costs can be defined as:

Accepted Answer

A) Costs that are expected to increase regardless of the course of action chosen. 
B) The differences between costs incurred under alternative courses of action. 
C) Costs incurred in the past. 
D) Costs that are irrelevant in decision making. 
A) Costs that are expected to increase regardless of the course of action chosen. 
B) The differences between costs incurred under alternative courses of action. 
C) Costs incurred in the past. 
D) Costs that are irrelevant in decision making.

Question 18

A sunk cost is the benefit that could have been obtained by pursuing an alternate course of action.

Accepted Answer

A) True 
 B)False

Question 19

Sunk costs are relevant to decisions about replacing plant assets.

Accepted Answer

A) True 
 B)False

Question 20

Relevant costs in business decisions
(a)Explain what is meant by each of the following terms: opportunity cost,sunk cost,and out-of-pocket cost.
(b)Identify which,if any,of the above three types of cost would be considered relevant in making a business decision.

Accepted Answer

(a)Opportunity cost is the benefit foreg

Exam 21: Incremental Analysis

Opportunity costs are irrelevant in decision making.

Products resulting from a shared manufacturing process are

The relevant costs and revenues to consider in a special order decision include variable costs,fixed costs,and incremental revenues.

Opportunity costs are recorded in the accounting records.

Incremental revenue is relevant in decision making.

A decision to discontinue a given product on the basis of contribution margin data should include consideration of the probable impact of the discontinuance on the sales of other products.

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

Joint costs are the middle costs of a product.

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:

In order to be consistent with IASB Standards,U.S.GAAP now requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be expensed immediately.

Products for which sales of one contribute to the sales of another are called:

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

Incremental revenues:

In determining whether to scrap or to rebuild defective units of product,the cost already incurred in producing the defective units is not relevant.

Incremental costs can be defined as:

A sunk cost is the benefit that could have been obtained by pursuing an alternate course of action.

Sunk costs are relevant to decisions about replacing plant assets.

Relevant costs in business decisions (a)Explain what is meant by each of the following terms: opportunity cost,sunk cost,and out-of-pocket cost. (b)Identify which,if any,of the above three types of cost would be considered relevant in making a business decision.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values

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