1.) the method of evaluating financial data that change under

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 these.


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 these.


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 these.


12.)  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.


13.)  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.


14.)  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: 


Direct Materials $80

Direct Labor 60

Variable overhead 30

Fixed overhead (allocated) 20


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


Variable selling cost (commission) $25

Fixed selling and administrative cost 10


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.


15.)  The key to analyzing a sell as is or process further decision is to determine that: 

  a. opportunity costs exceed sunk costs.

  b. incremental revenues exceed incremental costs.

  c. differential costs do not exist.

  d. all allocated costs are included in the decision.


16.)  In a make or buy decision which of the following costs would be considered relevant? 

  a. avoidable costs.

  b. unavoidable costs.

  c. sunk costs.

  d. allocated costs


17.)  Which of the following qualitative factors favors the buy option in the make or buy decision? 

  a. production scheduling.

  b. utilization of idle capacity.

  c. ability to control quality.

  d. technical expertise of supplier.


18.)  Product Z sells for $18 per unit as is but if it is enhanced it can be sold for $24 per unit. The enhancement process will cost $50,000 for 10,000 units. If the 10,000 units of Product Z are sold as is without further processing, the company: 

  a. will incur an incremental profit of $10,000.

  b. will incur an opportunity cost of $10,000.

  c. will incur an incremental profit of $1 per unit.

  d. will incur an incremental loss of $6 per unit.


19.)  A(n) _____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned. 

  a. relevant cost.

  b. opportunity cost.

  c. incremental cost.

  d. target cost.


20.)  Product X sells for $80 per unit in the marketplace and ABC Company requires a 35% minimum profit margin on all product lines. In order to compete in this market, the target cost for Product X must be equal to or lower than: 

  a. $28

  b. $45

  c. $52 

  d. $80


21.)  Which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization? 

  a. avoidable costs.

  b. unavoidable costs.

  c. opportunity costs.

  d. differential costs.


22.)  The decision to continue or discontinue a segment of the business should focus on: 

  a. sales minus total variable expenses and total fixed expenses.

  b. sales minus total variable expenses and avoidable fixed expenses of the segment.

  c. sales minus total variable expenses and allocated fixed expenses of the business.

  d. none of these.


23.)  The decision for solving production mix problems involving multiple products and scarce production resources should focus on: 

  a. gross profit of each product.

  b. sales price of each product.

  c. contribution margin per unit of scarce resource.

  d. contribution margin of each product.


24.)  XYZ Company produces three products: A, B, and C. Product A has a contribution margin of $20 and requires 1 hour of machine time. Product B has a contribution margin of $30 and requires 2 hours of machine time. Product C has a contribution margin of $36 and requires 1.5 hours of machine time. If machine hours are considered scarce, in what product mix order should XYZ Company schedule the production of Products A, B, and C for the available machine hours? 

  a. first A, then B, then C.

  b. first C, then A, then B.

  c. first C, then B, then A.

  d. first B, then C, then A.


25.)  A principal difference between operational budgeting and capital budgeting is the time frame of the budget. Because of this difference, capital budgeting: 

   a. is an activity that involves only the financial staff.

  b. is done on a rolling budget period basis.

  c. focuses on the present value of cash flows from investments.

  d. is concerned with a long-term net income forecast.


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