accounts data bank

Multiple Choice Questions

1. The method of evaluating financial data that change under different courses of action is called:

A. financial statement analysis.

B. break-even analysis.

C. incremental analysis.

D. cost-benefit analysis.

2. Braizen, Inc. produces a product with a $30 per-unit variable cost and an $80 per-unit sales price. Fixed manufacturing overhead costs are $100,000. The firm has a one-time opportunity to sell an additional 1,000 units at $60 each that would not affect its current sales. Assuming the company has sufficient capacity to produce the additional units, how would the acceptance of the special order affect net income?

A. Income would decrease by $30,000.

B. Income would increase by $30,000.

C. Income would increase by $140,000.

D. Income would increase by $40,000.

3. Opportunity costs are:

A. included in inventory.

B. foregone benefits.

C. sunk costs.

D. included in cost of goods sold.

4. A sunk cost is a cost that:

A. has been incurred and cannot be eliminated.

B. is never relevant in decision-making.

C. is never a differential cost.

D. all of the above.

5. _____________ is a cost management technique in which the firm determines the required cost for a product or service in order to earn a desired profit when the marketplace establishes the product's selling price.

A. Relevant costing

B. Product costing

C. Differential costing

D. Target costing

6. ______________ can be measured as the income that could have been earned on an asset, based on the potential rate of return that is lost or sacrificed when one alternative use of the asset is chosen over another.

A. Target cost

B. Sunk cost

C. Opportunity cost

D. Allocated cost

7. _____________ costs between two alternative projects are those that would result from selecting one alternative instead of the other.

A. Allocated

B. Differential

C. Sunk

D. Irrelevant

8. Which of the following cost classifications would not be considered relevant in comparing decision alternatives?

A. Opportunity cost.

B. Differential cost.

C. Sunk cost.

D. None of the above.

9. In considering whether to accept a special order at a price less than the normal selling price of the product and where the additional sales will make use of present idle capacity, which of the following costs will not be relevant?

A. Direct labor.

B. Direct materials.

C. Variable manufacturing overhead.

D. Fixed manufacturing overhead that cannot be avoided.

10. A cost classified "for decision making purposes" would include:

A. period cost.

B. opportunity cost.

C. controllable cost.

D. inventoriable cost.

11. Relevant costs in decision-making:

A. are future costs that represent differences between decision alternatives.

B. result from past decisions.

C. should not influence the decision.

D. none of the above.

12. A cost is considered relevant if:

A. it is positive.

B. it is sunk.

C. it makes a difference.

D. it can't be changed.

13. If a cost is irrelevant to a decision, the cost could not be a:

A. fixed cost.

B. sunk cost.

C. differential cost.

D. variable cost.

14. The potential rental value of space used in the manufacturing process:

A. is a variable production cost.

B. is an unavoidable production cost.

C. is a sunk production cost.

D. is an opportunity cost if production is not outsourced.

15. Greenland Sports, Inc. has been asked to submit a bid to the National Hockey League on supplying 1,000 pairs of professional quality skates. The cost per pair of skates has been determined as follows:

Other non-manufacturing costs associated with each pair of skates are:

Assume the commission on the sale of skates to the National Hockey League would be reduced to $15 per pair and that available production capacity exists to produce the 1,000 pairs of skates. The lowest price the firm can bid is some price greater than:

A. $185.

B. $190.

C. $215.

D. $225.