Question :
43. Which of the following would be an example of a : 1229593
43. Which of the following would be an example of a sunk cost?
A. The cost of a new oil burner that replaced a destroyed one.
B. The cost of an old inefficient oil burner that will be replaced by a more modern and efficient one.
C. Depreciation expense.
D. Lost revenue from a bad debt.
44. Sunk costs:
A. Have already been incurred as a result of past actions.
B. Vary among the alternative courses of action being considered.
C. Are benefits that could have been obtained by following another course of action.
D. Result from unfavorable cost variances.
45. Mell Co. manufactured 100 personal computers at a cost of $30,000. It can sell them as is for $65,000, or install hard disks in them and sell them for $105,000. The $30,000 original manufacturing cost is:
A. An out-of-pocket cost because it has already been paid.
B. A sunk cost because it is not relevant to the decision.
C. An incremental cost because it is relevant to the decision.
D. A fixed cost because it will remain the same no matter which action is taken.
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000.
46. In deciding whether to rework the tables or sell them as is, management should:
A. Compare the $305,000 proceeds from the sale of the tables as is, with the $355,000 cost of the tables.
B. Compare the $605,000 possible revenue from refinished tables with the total cost of $355,000 plus $315,000 to refinish.
C. Compare the $315,000 cost to refinish the tables with the incremental revenue of $300,000 if the tables are refinished.
D. Eliminate any alternative that results in a loss on the sale of the product.
47. Which of the following is not relevant to management’s decision regarding refinishing the tables or selling them as is?
A. The additional $300,000 revenue that can be generated if the tables are refinished.
B. The $355,000 manufacturing cost of the tables already incurred.
C. The additional $315,000 cost to refinish the tables.
D. The effect of selling “seconds” on Fancy’s reputation as a fine-furniture manufacturer.
48. Which cost is not relevant in making financial decisions?
A. Sunk costs.
B. Opportunity costs.
C. Incremental costs.
D. All three are relevant.
49. Products for which sales of one contribute to the sales of another are called:
A. Complementary products.
B. Competing products.
C. Contributory products.
D. Codependent products.
50. Perfect Plumbing Corporation currently manufactures a valve for use in water pumps that it produces for sale. The company is considering purchasing the valves from an outside supplier rather than manufacturing them. Which of the following costs is not relevant to the decision?
A. The cost of direct material required to make the valve.
B. The price charged by the outside supplier for an identical valve.
C. The cost of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve.
D. The salvage value of the machinery owned by Perfect Plumbing used exclusively to manufacture this valve.
51. The Magic Microbrewery has a limited amount of vat capacity available in which it can ferment beer. In deciding which beers to brew, Magic management should consider:
A. The contribution margins of the individual beers.
B. The unit contribution margins of the individual beers.
C. The contribution margin ratios of the individual beers.
D. The contribution margin per unit of vat capacity of the individual beers.
52. The cost of draining sap out of a maple tree to manufacture maple syrup and maple sugar is an example of:
A. After-split-off costs.
B. Sunk costs.
C. Incremental costs.
D. Joint costs.
