ACCT 472.21 Ch 21 – Flashcards
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If a plant is operating at full capacity and receives a one-time opportunity to accept an order at a special price below its usual price, then
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the order will likely be rejected.
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The process of evaluating financial data that change under alternative courses of action is called
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incremental analysis.
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A factory is operating at less than 100% capacity. Potential additional business will not use up the remainder of the plant capacity. Given the following list of costs, which one should be ignored in a decision to produce additional units of product?
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Fixed factory overhead
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Which of the following is not a true statement?
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Incremental analysis is the same as CVP analysis.
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Which of the following is not involved in the sell or process further decision?
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Fixed costs
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Which of the following would generally not affect a make-or-buy decision?
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Selling expenses
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Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?
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Both variable and fixed costs will be relevant.
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Each of the following is a disadvantage of buying rather than making a component of a company's product except that
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profitable product lines may be dropped.
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Book value of old equipment is considered to be a
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sunk cost.
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Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?
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Net income will increase if the special sales price per unit exceeds the unit variable costs.
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Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price?
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When incremental revenues exceed incremental costs
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Incremental analysis would not be appropriate for
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analysis of manufacturing variances.
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In an equipment replacement decision, the cost of the old equipment is a(n)
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sunk cost.
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In a make-or-buy decision, opportunity costs are
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added to the make total cost.
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In incremental analysis,
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all costs are relevant if they change between alternatives.
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Incremental analysis would be appropriate for
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all of these
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The decision rule on whether to sell or process further
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is process further if incremental revenue from such processing exceeds the incremental processing costs.
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Which of the following stages of the management decision-making process is improperly sequenced?
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Assign responsibility for the decision à Identify the problem.
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A company is deciding on whether to replace some old equipment with new equipment. Which of the following is not a relevant cost for incremental analysis?
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Accumulated depreciation on the old equipment
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When will the elimination of a product line have no effect on the company's overall profit?
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When the avoidable fixed costs equal the product line's contribution margin
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Which one of the following does not affect a make-or-buy decision?
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Incremental revenue
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Which of the following will always be a relevant cost?
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Opportunity cost
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A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to
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provide relevant revenue and cost data about each course of action.
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Opportunity cost must be considered in decisions involving
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resources that have alternative uses.
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In a make-or-buy decision, which costs can be considered relevant?
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Incremental variable costs, incremental fixed costs, and sunk costs
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Which is the first step in the management decision-making process?
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Identify the problem and assign responsibility.
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A company is considering replacing old equipment with new equipment. Which of the following is a relevant cost for incremental analysis?
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Cost of the new equipment
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If an unprofitable segment is eliminated
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variable expenses of the eliminated segment will be eliminated.
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Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?
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The book value of the old equipment
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Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?
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The salvage value of the old equipment
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Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?
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Consider the opportunity cost of lost sales in the incremental analysis.
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Which decision will involve no incremental revenues?
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Make or buy decision
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Costs that will differ between alternatives and influence the outcome of a decision are
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relevant costs.
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What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?
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It is relevant since it reduces the cost of the new equipment.
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An opportunity cost
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is the potential benefit that may be obtained by following an alternative course of action.
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Incremental analysis is most useful
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in developing relevant information for management decisions.
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The focus of a sell or process further decision is
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both incremental revenue and incremental cost.
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What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?
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Net income will decrease.
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Internal reports that review the actual impact of decisions are prepared by
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management accountants.
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Which statement is true concerning the decision rule on whether to make or buy?
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The company should buy if the cost of buying is less than the cost of producing.
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Which of the following is not a qualitative factor to be considered in a make-or-buy decision?
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Incremental benefit from buying outside
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When will the elimination of a product line have no effect on the company's overall profit?
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When the avoidable fixed costs equal the product line's contribution margin
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The cash disposal value of old equipment is considered to be a (an)
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relevant cost.
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The source of data to serve as inputs in incremental analysis is generated by
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all of these.
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What of the following would not be relevant in a make-or-buy decision?
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Unavoidable variable costs
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In incremental analysis,
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both costs and revenues may be analyzed.
