Which of the following best describes a "sunk cost"? |
A) Costs that were incurred in the past and cannot be changed |
An "opportunity cost" is best described by which of the following? |
Benefits foregone by choosing a particular alternative course of action |
A "relevant cost" is best described by which of the following |
Expected future costs that differ among alternatives |
) "Contribution margin per unit" is best described by which of the following? |
Sales price per unit minus variable cost unit |
Expected future data that differs among alternative courses of action are referred to as |
relevant information |
Which of the following is irrelevant when making a decision? |
The cost of an asset that the company is considering replacing |
) Fixed costs that do not differ between two alternatives are |
irrelevant to the decision |
Which of the following is a sunk cost |
Purchase price of vehicle to be traded in |
Fixed costs that may be avoided in the future are referred to as |
relevant costs. |
A sunk cost is described as which of the following |
A historical cost that is always irrelevant |
The effect of a plant closing on employee morale is an example of which of the following |
A qualitative factor |
The format of the income statement most useful in decision-making is which of the following? |
Contribution margin format |
Which of the information provided in the table is irrelevant to the replacement decision |
The current disposal value of the old machine |
All of the following are relevant to the decision to replace equipment except the |
cost of old equipment. |
Cost of roof repair made on rental property last year |
irrelevant |
b) The cost of insurance on a new vehicle when deciding to buy a new vehicle |
relevant |
c) Cost of new equipment under evaluation to replace used equipment |
relevant |
d) Original cost of old equipment that is being evaluated for replacement |
irrelevant |
e) Cost of previous year's insurance policy on old equipment being evaluated for replacement |
irrelevant |
f) Accumulated depreciation on old equipment being evaluated for replacement |
irrelevant |
In a special sales order decision, the special price must exceed the variable cost of filling the order. In other words, the special order must have |
a positive contribution margin. |
n a special sales order decision, incremental fixed costs that will be incurred if the special order is accepted are considered to be |
relevant to the decision. |
A manager should always reject a special order if |
the special order price is less than the variable costs of the order. |
Which would be a consideration for making special orders? |
All of the above |
A company should ________ when making a short-term special decision. |
separate variable costs from fixed costs |
Which of the following best describes "target costing"? |
An approach to pricing that begins with revenue at market price and subtracts desired profit to arrive at target total cost |
"Total cost of product or service" is best described as which of the following? |
All costs incurred along the value chain in connection with the product or service |
Which of the following describes the products and services of companies that are price-setters? |
They tend to be unique. |
Stockholders' expectations of company profits are affected by which of the following? |
All of the above |
The cost-plus price is described by which of the following |
Total cost plus desired profit |
Target total cost is described by which of the following? |
Revenue at market price minus desired profit |
Managers must consider which of the following when pricing a product or service? |
All costs |
Which of the following pairs are characteristics of price-takers? |
Target costing and heavy competition |
Which of the following pairs are characteristics of price-setters? |
Cost-plus pricing and less competition |
Big-box retailers such as Lowe's are considered price-takers because |
their products are not unique. |
Target total cost is defined as |
revenue at market price less desired profit. |
Methods for a company to meet target total cost and the profit goals if the current cost of the product is higher than the target cost include which of the following? |
Any of the above |
In pricing a product, managers should consider which of the following |
None of the above |
All of the following factors affect the amount a customer is willing to pay for a product, except |
the selling company's costs |
Unavoidable fixed costs are |
irrelevant to the decision of whether to discontinue a product line because they will not differ between alternatives. |
Common fixed costs that are allocated between departments are generally |
irrelevant to the decision of whether to discontinue the department |
Fixed costs that are allocated among all departments are known as |
common fixed costs. |
A company's manager would consider which of the following in deciding whether to discontinue its |
All of the above |
All of the following are considerations for discontinuing a product or product line, except |
not having any free capacity |
A drug store decides to discontinue its health and beauty section of products because it has been unprofitable. This strategy could backfire because |
the store's sales may suffer by not having this convenience category of products |
Fixed costs that continue to exist even after a product line is discontinued are called |
unavoidable fixed costs |
The contribution margin per unit of constraint is calculated as |
contribution margin per unit × units per constraint |
) Companies with production constraints and irrelevant fixed costs will be most profitable when they maximize production of the product with the highest |
contribution margin per unit of the constraint |
The factor that restricts production or sale of a product is which of the following? |
Constraint |
A "constraint" is best described by which of the following? |
A factor that restricts production or sales of a product |
A "sales mix" is best described by which of the following |
The relative number of all products to be sold |
Which of the following could be a constraint for selling a product? |
All of the above could be constraints. |
All of the following would be considered in evaluating product or sales mix allocations, except |
All of the following would be considered in evaluating product or sales mix allocations, except |
Changing the product mix emphasis in the short run will usually not affect |
total fixed costs. |
) In deciding whether to outsource, managers must consider |
relevant fixed and variable components. |
Outsourcing decisions are sometimes referred to as |
make-or-buy decisions |
All of the following are outsourcing considerations, except |
How do our fixed costs compare to the outsourcing cost? |
If a company decides to outsource and then has freed capacity, the decision on what to do with that freed capacity would be based upon |
) opportunity costs. |
Managers should consider which of the following when deciding whether to outsource a product or service |
All of the above |
When the extra revenue from processing further is less than the extra cost of processing further, the best decision would be to |
not process further. |
The benefit foregone by choosing a particular alternative course of action is referred to as a(n |
opportunity cost |
In making the decision whether to sell a product as is or process the product further, the expected income from selling the product as is may be defined as which of the following |
The opportunity cost of processing the product further |