accounting test 2 – Flashcards
Unlock all answers in this set
Unlock answersquestion
A cost that is relevant in one decision may not be relevant in another decision.
answer
True
question
In a decision to drop a product, the product should not be charged for factory rent if the space in which the product is produced has no alternative use and the rental payment is unavoidable.
answer
true
question
In a sell or process further decision, which of the following costs is relevant?
answer
A variable production cost incurred after split-off.
question
opportunity costs
answer
opportunity costs are relevant in decision making
question
A national retail company has segmented its income statement by sales territories. If each sales territory statement is further segmented by individual stores, which of the following will most likely occur?
answer
some traceable fixed expenses in the sales territory segmented statement will become common fixed expenses in the individual store segmented statement.
question
Managers will often allocate common fixed expenses to business segments because:
answer
they believe this practice will ensure that the company's common fixed expenses are covered.
question
All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high fixed costs and low variable costs than in a company with high variable costs and low fixed costs.
answer
True
question
For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales.
answer
True
question
All other things the same, an increase in total fixed expenses will increase the break-even point.
answer
True
question
All other things the same, an increase in variable expense per unit will reduce the break-even point.
answer
False
question
One of the advantages of allocating common fixed costs to a product is that such allocations more accurately reflect the product's true profitability.
answer
False
question
When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.
answer
False
question
Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.
answer
False
question
A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments.
answer
False
question
A transfer price is the price charged when a company provides goods or services to an outside company.
answer
A transfer price is the price charged when a company provides goods or services to an outside company.
question
The selling division in a transfer pricing situation should want the transfer price to cover at least the variable cost per unit plus the lost contribution margin per unit on outside sales.
answer
True
question
Opportunity cost should be ignored in setting the transfer price.
answer
false
question
When a division is operating at full capacity, the transfer price to other divisions should not include opportunity costs.
answer
False
