Question 1

Facility-level costs are not involved in decisions to eliminate a segment of a business.

Accepted Answer

A) True 
 B)False

Question 2

Stephenson Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below:   The equipment was purchased last year and has no resale value. Which of these amounts is relevant for the selection of one contract over another?

Accepted Answer

A)  Contract revenue and labor costs 
B)  Materials, consulting advice and allocated overhead 
C)  Cost of consulting advice and allocated overhead 
D)  Contract revenue, labor costs and depreciation on equipment 
A)  Contract revenue and labor costs 
B)  Materials, consulting advice and allocated overhead 
C)  Cost of consulting advice and allocated overhead 
D)  Contract revenue, labor costs and depreciation on equipment

Question 3

The decision to accept a lower-than-normal selling price may depend on the availability of excess capacity.

Accepted Answer

A) True 
 B)False

Question 4

Sunk costs are sometimes relevant for decision-making purposes.

Accepted Answer

A) True 
 B)False

Question 5

Clean, Inc. cleans and waxes floors for commercial customers. The company is presently operating at less than capacity with equipment and employees idle at times. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $4,500. The size of the proposed job is 11,000 square feet. The company's normal service costs are as follows:   If the company accepts the special offer:

Accepted Answer

A)  The company will lose $1,110 on the job. 
B)  The company will lose $2,210 on the job. 
C)  The company will lose $230 on the job. 
D)  The company will earn $2,520 on the job. 
A)  The company will lose $1,110 on the job. 
B)  The company will lose $2,210 on the job. 
C)  The company will lose $230 on the job. 
D)  The company will earn $2,520 on the job.

Question 6

The Page Turner Publishing Company is trying to decide whether or not to accept a special order for its latest blockbuster. In making this decision, which level of costs will most likely be relevant to the decision?

Accepted Answer

A)  Batch-level costs 
B)  Facility-level costs 
C)  Unit-level costs 
D)  None of the above. 
A)  Batch-level costs 
B)  Facility-level costs 
C)  Unit-level costs 
D)  None of the above.

Question 7

Indicate whether each of the following statements is true or false.

Accepted Answer

@#IMG-DLM&_TB3570_00

Question 8

Indicate whether each of the following statements is true or false.

Accepted Answer

@#IMG-DLM&_TB3570_00

Question 9

Select the incorrect statement regarding sunk costs.

Accepted Answer

A)  Sunk costs cannot be avoided. 
B)  Sunk costs are relevant if they differ between the alternatives. 
C)  Sunk costs are costs that have been incurred in past transactions. 
D)  Sunk costs include historical costs such as equipment acquisition costs. 
A)  Sunk costs cannot be avoided. 
B)  Sunk costs are relevant if they differ between the alternatives. 
C)  Sunk costs are costs that have been incurred in past transactions. 
D)  Sunk costs include historical costs such as equipment acquisition costs.

Question 10

Monica paid $12 for a music CD for which she later was offered $15. After that someone offered her $18 for the CD. If Monica keeps the CD, the amount of her opportunity cost is $33.

Accepted Answer

A) True 
 B)False

Question 11

Indicate whether each of the following statements is true or false.

Accepted Answer

@#IMG-DLM&_TB3570_00

Question 12

Jack currently works for a law firm full time and earns $60,000 a year. He is thinking of quitting his job to pursue a medical degree. Medical school will cost him $100,000 per year. If Jack quits his job and goes to medical school, the salary he currently earns would be considered what type of cost?

Accepted Answer

A)  Irrelevant cost 
B)  Sunk cost 
C)  Opportunity cost 
D)  Fixed cost 
A)  Irrelevant cost 
B)  Sunk cost 
C)  Opportunity cost 
D)  Fixed cost

Question 13

The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.

Accepted Answer

A) True 
 B)False

Question 14

Jason is trying to decide which one of two job offers he will accept. Several items are presented below:   Which of the above items would be considered relevant costs?

Accepted Answer

A)  (1), (3), (5) 
B)  (2), (4) 
C)  (5) 
D)  None of the above. 
A)  (1), (3), (5) 
B)  (2), (4) 
C)  (5) 
D)  None of the above.

Question 15

The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below:   Based on this information, the company should:

Accepted Answer

A)  Eliminate the Novice line because it is operating at a loss. 
B)  Keep the Novice line because it contributes $40,000 to total profitability. 
C)  Keep the Novice line because it contributes $55,000 to total profitability. 
D)  It is impossible to determine with the given information. 
A)  Eliminate the Novice line because it is operating at a loss. 
B)  Keep the Novice line because it contributes $40,000 to total profitability. 
C)  Keep the Novice line because it contributes $55,000 to total profitability. 
D)  It is impossible to determine with the given information.

Question 16

Special order decisions involve:

Accepted Answer

A)  an offer to sell goods at a price that is higher than normal. 
B)  buying goods from other companies rather than making them internally. 
C)  an offer from a customer to buy goods at a lower-than-normal selling price. 
D)  None of the above. 
A)  an offer to sell goods at a price that is higher than normal. 
B)  buying goods from other companies rather than making them internally. 
C)  an offer from a customer to buy goods at a lower-than-normal selling price. 
D)  None of the above.

Question 17

Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below:   What are the incremental (differential) costs of the Western Tour?

Accepted Answer

A)  $4,000 
B)  $6,000 
C)  $8,000 
D)  None of these. 
A)  $4,000 
B)  $6,000 
C)  $8,000 
D)  None of these.

Question 18

The costs and revenues associated with two alternatives are listed below:   Which alternative should be selected based on this information?

Accepted Answer

A)  Alternative 2 because it has a higher profit. 
B)  Alternative 2 because it has the same product- & facility-level costs. 
C)  Alternative 1 because it has fewer unit-level costs. 
D)  Alternative 1 because it has a higher profit. 
A)  Alternative 2 because it has a higher profit. 
B)  Alternative 2 because it has the same product- & facility-level costs. 
C)  Alternative 1 because it has fewer unit-level costs. 
D)  Alternative 1 because it has a higher profit.

Question 19

Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the order. Accepting the order will increase Outdoor Living's variable manufacturing costs. Which type of cost is considered a sunk cost to Outdoor Living's decision of whether to accept or reject the special order?

Accepted Answer

A)  Raw materials to make the 500 hammocks 
B)  Labor cost to make the 500 hammocks 
C)  Depreciation on equipment that would be used to make the hammocks 
D)  Materials handling cost 
A)  Raw materials to make the 500 hammocks 
B)  Labor cost to make the 500 hammocks 
C)  Depreciation on equipment that would be used to make the hammocks 
D)  Materials handling cost

Question 20

Alex brought his lunch today but now a co-worker has asked him to go to the deli across the street. Select the correct statement from the following.

Accepted Answer

A)  The cost of the lunch Alex had brought is relevant to Alex's decision to have lunch with his friend. 
B)  The cost of the lunch that Alex had brought has nothing to do with his current decision. 
C)  The cost to buy lunch at the deli is not relevant because it has not yet been incurred. 
D)  The cost of the lunch Alex already has represents the opportunity cost of dining with his friend. 
A)  The cost of the lunch Alex had brought is relevant to Alex's decision to have lunch with his friend. 
B)  The cost of the lunch that Alex had brought has nothing to do with his current decision. 
C)  The cost to buy lunch at the deli is not relevant because it has not yet been incurred. 
D)  The cost of the lunch Alex already has represents the opportunity cost of dining with his friend.

Facility-level costs are not involved in decisions to eliminate a segment of a business.

Stephenson Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below: The equipment was purchased last year and has no resale value. Which of these amounts is relevant for the selection of one contract over another?

The decision to accept a lower-than-normal selling price may depend on the availability of excess capacity.

Sunk costs are sometimes relevant for decision-making purposes.

The Page Turner Publishing Company is trying to decide whether or not to accept a special order for its latest blockbuster. In making this decision, which level of costs will most likely be relevant to the decision?

Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.

Select the incorrect statement regarding sunk costs.

Monica paid $12 for a music CD for which she later was offered $15. After that someone offered her $18 for the CD. If Monica keeps the CD, the amount of her opportunity cost is $33.

Indicate whether each of the following statements is true or false.

The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.

Jason is trying to decide which one of two job offers he will accept. Several items are presented below: Which of the above items would be considered relevant costs?

The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below: Based on this information, the company should:

Special order decisions involve:

Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below: What are the incremental (differential) costs of the Western Tour?

The costs and revenues associated with two alternatives are listed below: Which alternative should be selected based on this information?

Alex brought his lunch today but now a co-worker has asked him to go to the deli across the street. Select the correct statement from the following.

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 13: Relevant Information for Special Decisions

Facility-level costs are not involved in decisions to eliminate a segment of a business.

Stephenson Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below: The equipment was purchased last year and has no resale value. Which of these amounts is relevant for the selection of one contract over another?

The decision to accept a lower-than-normal selling price may depend on the availability of excess capacity.

Sunk costs are sometimes relevant for decision-making purposes.

The Page Turner Publishing Company is trying to decide whether or not to accept a special order for its latest blockbuster. In making this decision, which level of costs will most likely be relevant to the decision?

Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.

Select the incorrect statement regarding sunk costs.

Monica paid $12 for a music CD for which she later was offered $15. After that someone offered her $18 for the CD. If Monica keeps the CD, the amount of her opportunity cost is $33.

Indicate whether each of the following statements is true or false.

The book value of equipment generally is one of the most important factors to consider in deciding to replace the equipment.

Jason is trying to decide which one of two job offers he will accept. Several items are presented below: Which of the above items would be considered relevant costs?

Special order decisions involve:

Scholastic Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below: What are the incremental (differential) costs of the Western Tour?

The costs and revenues associated with two alternatives are listed below: Which alternative should be selected based on this information?

Alex brought his lunch today but now a co-worker has asked him to go to the deli across the street. Select the correct statement from the following.

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters