Incremental - Multiple

b

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

a. assign responsibility for the decision.

b. provide relevant revenue and cost data about each course of action.

c. determine the amount of money that should be spent on a project.

d. decide which actions that management should consider

b

Which of the following stages of the management decision-making process is improperly sequenced?

a. Evaluate possible courses of action - Make decision.

b. Assign responsibility for the decision - Identify the problem.

c. Identify the problem - Determine possible courses of action.

d. Assign responsibility for decision - Determine possible courses of action.

c

Internal reports that review the actual impact of decisions are prepared by

a. department heads.

b. the controller.

c. management accountants.

d. factory workers

b

Which of the following steps in the management decision-making process does not generally involve the managerial accountant?

a. Determine possible courses of action

b. Make the appropriate decision based on relevant data

c. Prepare internal reports that review the impact of decisions

d. None of these answers are correct.

c

Which is the first step in the management decision-making process?

a. Determine and evaluate possible courses of action.

b. Review results of the decision.

c. Identify the problem and assign responsibility.

d. Make a decision

d

Which of the following will always be a relevant cost?

a. Sunk cost

b. Fixed cost

c. Variable cost

d. Opportunity cost

c

Costs that will differ between alternatives and influence the outcome of a decision are

a. sunk costs.

b. unavoidable costs.

c. relevant costs.

d. product costs

b

A revenue that differs between alternatives and makes a difference in decision-making is called a(n)

a. sales revenue.

b. incremental revenue.

c. unavoidable revenue.

d. irrelevant revenue

c

Which of the following is an irrelevant cost?

a. An avoidable cost

b. An incremental cost

c. A sunk cost

d. An opportunity cost

c

Relevant costs are always

a. fixed costs.

b. variable costs.

c. avoidable costs.

d. sunk costs.

c

The process of evaluating financial data that change under alternative courses of action is called

a. double entry analysis.

b. contribution margin analysis.

c. incremental analysis.

d. cost-benefit analysis.

b

Nonfinancial information that management might evaluate in making a decision would not include

a. employee turnover.

b. contribution margin.

c. the environment.

d. the corporate profile in the community

b

Incremental analysis is synonymous with

a. difficult analysis.

b. differential analysis.

c. gross profit analysis.

d. derivative analysis.

c

In incremental analysis,

a. only costs are analyzed.

b. only revenues are analyzed.

c. both costs and revenues may be analyzed.

d. both costs and revenues that stay the same between alternate courses of action will be analyzed.

a

Incremental analysis is most useful

a. in developing relevant information for management decisions.

b. in choosing between capital budgeting methods.

c. in evaluating the master budget.

d. as a replacement technique for variance analysis.

d

The source of data to serve as inputs in incremental analysis is generated by

a. market analysts.

b. engineers.

c. accountants.

d. All of these answers are correct

b

Which of the following is not a true statement?

a. Incremental analysis might also be referred to as differential analysis.

b. Incremental analysis is the same as CVP analysis.

c. Incremental analysis is useful in making decisions.

d. Incremental analysis focuses on decisions that involve a choice among alternative courses of action.

d

Incremental analysis would not be appropriate for

a. a make or buy decision.

b. an allocation of limited resource decision.

c. elimination of an unprofitable segment.

d. analysis of manufacturing variances

d

Incremental analysis would be appropriate for

a. acceptance of an order at a special price.

b. a retain or replace equipment decision.

c. a sell or process further decision.

d. All of these answers are correct

b

Which of the following is a true statement about cost behaviors in incremental analysis?

1. Fixed costs will not change between alternatives.

2. Fixed costs may change between alternatives.

3. Variable costs will always change between alternatives.

a. 1

b. 2

c. 3

d. 2 and 3

a

A company is considering the following alternatives:

Alternative 1 Alternative 2

Revenues $120,000 $120,000

Variable costs 60,000 70,000

Fixed costs 35,000 35,000

Which of the following are relevant in choosing between the alternatives?

a. Variable costs

b. Revenues

c. Fixed costs

d. Variable costs and fixed costs

b

In incremental analysis,

a. costs are not relevant if they change between alternatives.

b. all costs are relevant if they change between alternatives.

c. only fixed costs are relevant.

d. only variable costs are relevant.

d

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

a. only variable costs are relevant.

b. fixed costs are not relevant.

c. the order will likely be accepted.

d. the order will likely be rejected

d

Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price?

a. Never

b. When additional fixed costs must be incurred to accommodate the order

c. When the company thinks it can use the cheaper materials without the customer’s knowledge

d. When incremental revenues exceed incremental costs

d

If a company must expand capacity to accept a special order, it is likely that there will be

a. an increase in unit variable costs.

b. no increase in fixed costs.

c. an increase in variable and fixed costs per unit.

d. an increase in fixed costs.

b

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

a. Net income will not be affected.

b. Net income will increase if the special sales price per unit exceeds the unit variable costs.

c. Net income will decrease.

d. Additional fixed costs will probably be incurred

a

If a company anticipates that other sales will be affected by the acceptance of a special order, then

a. lost sales should be considered in the incremental analysis.

b. lost sales should not be considered in the incremental analysis.

c. the order should not be accepted.

d. the order will only be accepted if the plant is below capacity.

c

Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?

a. Unit variable costs will increase.

b. Fixed costs will not be relevant.

c. Both variable and fixed costs will be relevant.

d. The company should accept the order.

b

A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur?

a. Incremental costs will not be affected.

b. Net income will increase if the special sales price per unit exceeds the unit variable costs.

c. There are no incremental revenues.

d. Both fixed and variable costs will increase.

b

Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?

a. Reject the order.

b. Consider the opportunity cost of lost sales in the incremental analysis.

c. Accept the order.

d. Accept the order if the plant is below capacity

b

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?

a. Variable selling expenses

b. Fixed factory overhead

c. Direct labor

d. Contribution margin of additional units

d

A company is contemplating the acceptance of a special order. The order would not affect regular sales and could be filled without exceeding plant capacity. However, a new stamping machine would have to be purchased in order to stamp the customer’s name on the product. Which of the following is likely?

a. Total variable costs will be irrelevant.

b. Only variable costs will be relevant.

c. Only fixed costs will be relevant.

d. Both variable and fixed costs will be relevant

d

In the analysis concerning the acceptance or rejection of a special order, which items are relevant?

a. Variable costs only

b. Fixed costs only

c. Variable costs and fixed costs

d. Variable costs and avoidable costs

a

What of the following would not be relevant in a make-or-buy decision?

a. Unavoidable variable costs

b. Incremental fixed costs

c. Opportunity costs

d. Avoidable fixed cost

c

Which of the following is not a qualitative factor to be considered in a make-or-buy decision?

a. Possible lost jobs from buying outside

b. Supplier’s ability to satisfy quality standards

c. Incremental benefit from buying outside

d. Supplier’s ability to meet production schedule

d

In a make-or-buy decision, which costs can be considered relevant?

a. Unavoidable variable costs, incremental fixed costs, and sunk costs

b. Incremental variable costs, unavoidable fixed costs, and opportunity costs

c. Incremental variable costs, incremental fixed costs, and sunk costs

d. Incremental variable costs, incremental fixed costs, and opportunity costs

a

Which statement is true concerning the decision rule on whether to make or buy?

a. The company should buy if the cost of buying is less than the cost of producing.

b. The company should buy if the incremental revenue exceeds the incremental costs.

c. The company should buy as long as total revenue exceeds present revenues.

d. The company should buy assuming no additional fixed costs are incurred

c

Which one of the following does not affect a make-or-buy decision?

a. Variable manufacturing costs

b. Opportunity costs

c. Incremental revenue

d. Direct labor

a

Which decision will involve no incremental revenues?

a. Make or buy decision

b. Drop a product line

c. Accept a special order

d. Additional processing decision

c

An opportunity cost

a. should be initially recorded as an asset.

b. is the cost of a new product proposal.

c. is the potential benefit that may be obtained by following an alternative course of action.

d. is classified as manufacturing overhead.

d

Opportunity cost must be considered in decisions involving

a. budgeting.

b. financial accounting.

c. CVP analysis.

d. resources that have alternative uses

b

The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is

a. subtracted from the “Make” costs.

b. added to the “Make” costs.

c. added to the “Buy” costs.

d. None of these answers are correct.

b

Opportunity cost is usually

a. a standard cost.

b. a potential benefit.

c. a sunk cost.

d. included as part of cost of goods sold

c

Each of the following is a disadvantage of buying rather than making a component of a company’s product except that

a. quality control specifications may not be met.

b. the outside supplier could increase prices significantly in the future.

c. profitable product lines may be dropped.

d. the supplier may not deliver on time

d

The decision rule on whether to sell or process further

a. varies from situation to situation.

b. is process further as long as total revenue exceeds present revenues.

c. is process further if incremental revenue from such processing exceeds incremental fixed costs.

d. is process further if incremental revenue from such processing exceeds the incremental processing costs.

c

The focus of a sell or process further decision is

a. incremental revenue.

b. incremental cost.

c. both incremental revenue and incremental cost.

d. neither incremental revenue nor incremental cost

d

Which of the following is not involved in the sell or process further decision?

a. Revenues

b. Variable costs

c. Opportunity costs

d. Fixed costs

c

All of the following are relevant to the sell or process further decision except

a. costs incurred beyond the split-off point.

b. revenues at the split-off point.

c. costs incurred before the split-off point.

d. revenues beyond the split-off point

a

Costs incurred before the split-off point are

a. sunk costs.

b. incremental costs.

c. relevant costs.

d. opportunity costs

d

Which of the following terms are synonymous?

a. Avoidable costs and irrelevant costs

b. Unavoidable costs and incremental costs

c. Sunk costs and relevant costs

d. Joint costs and sunk costs

b

The point in the production process when joint products are readily identifiable is the

a. separation point.

b. split-off point.

c. common point.

d. break-even point

d

The costs incurred prior to the split-off point are referred to as

a. separable costs.

b. split-off costs.

c. joint product costs.

d. joint costs

d

When deciding whether or not to replace old equipment with new equipment, the overriding consideration is the

a. book value of the old equipment.

b. cost of replacing the old equipment.

c. salvage value of the old equipment.

d. difference between future cost savings and the new equipment’s costs

b

In an equipment replacement decision, the cost of the old equipment is a(n)

a. incremental cost.

b. sunk cost.

c. relevant cost.

d. opportunity cost

b

Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

a. The cost of the old equipment

b. The salvage value of the old equipment

c. The book value of the old equipment

d. The accumulated depreciation of the old equipment

d

A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis?

a. Annual operating cost of the new equipment

b. Annual operating cost of the old equipment

c. Net cost of the new equipment

d. Book value of the old equipment

d

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

a. It is relevant since it increases the cost of the new equipment.

b. It is not relevant since it reduces the cost of the old equipment.

c. It is not relevant to the decision since it does not impact the cost of the new equipment.

d. It is relevant since it reduces the cost of the new equipment

d

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

a. The book value of the old equipment

b. Depreciation expense of the old equipment

c. The loss on disposal of the old equipment

d. The current disposal price of the old equipment

d

The cash disposal value of old equipment is considered to be a (an)

a. irrelevant cost.

b. avoidable cost.

c. sunk cost.

d. relevant cost

c

Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

a. The cash price of the new equipment

b. The salvage value of the old equipment

c. The book value of the old equipment

d. The cost savings if the new equipment is purchased

c

Book value of old equipment is considered to be a

a. relevant cost.

b. semi-relevant cost.

c. sunk cost.

d. cost that can be changed by a present or future decision

d

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?

a. Annual operating cost of the new equipment

b. Annual operating cost of the old equipment

c. Net cost of the new equipment

d. Accumulated depreciation on the old equipment

d

A company is considering replacing old equipment with new equipment. Which of the following is a relevant cost for incremental analysis?

a. Annual depreciation charge on the old equipment

b. Book value of the old equipment

c. Estimated annual depreciation of the new equipment

d. Cost of the new equipment

b

In a retain or replace equipment decision, trade-in allowance available on old equipment

a. increases the cost of the new equipment.

b. is relevant because it will not be realized if the old equipment is retained.

c. is not relevant to the decision.

d. reduces the cost of the old equipment

b

What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?

a. All expenses of the eliminated segment will be eliminated.

b. Net income will decrease.

c. Net income will increase.

d. The company’s variable costs will increase

c

A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued,

a. total net income will increase by the amount of the product line’s fixed costs.

b. total net income will decrease by the amount of the product line’s fixed costs.

c. the contribution margin of the product line will indicate the net income increase or decrease.

d. the company’s total fixed costs will decrease

c

The potential effects of the decision to eliminate a line of business on existing employees and the community are

a. ignored in incremental analysis.

b. quantitative factors.

c. qualitative factors.

d. opportunity costs.

a

When will the elimination of a product line have no effect on the company’s overall profit?

a. When the avoidable fixed costs equal the product line’s contribution margin

b. When the unavoidable fixed costs equal the product line’s contribution margin

c. When there are no fixed costs incurred by the product line

d. When the product line contribution margin is negative

a

Accounting’s contribution to the decision-making process occurs in all of the following steps except to

a. identify the problem and assign responsibility.

b. determine possible courses of action.

c. review results of the decision.

d. make a decision.

a

In a make-or-buy decision, opportunity costs are

a. added to the make total cost.

b. deducted from the make total cost.

c. added to the buy total cost.

d. ignored.

a

Which of the following would generally not affect a make-or-buy decision?

a. Selling expenses

b. Direct labor

c. Variable manufacturing costs

d. Opportunity cost

c

A cost that cannot be changed by any present or future decision is a(n)

a. incremental cost.

b opportunity cost.

c. sunk cost.

d. variable cost.

c

If an unprofitable segment is eliminated

a. it is impossible for net income to decrease.

b. fixed expenses allocated to the eliminated segment will be eliminated.

c. variable expenses of the eliminated segment will be eliminated.

d. it is impossible for net income to increase.

d

All of the following are relevant in deciding whether to eliminate an unprofitable segment except the segment’s

a. sales.

b. variable expenses.

c. contribution margin.

d. fixed expenses.