Question :
38.The value of benefits foregone by selecting one decision alternative : 1302786
38.The value of benefits foregone by selecting one decision alternative over another is a(n)
A.unavoidable cost.
B.incremental benefit.
C.differential revenue.
D.opportunity cost.
39.A product line should be dropped when
A.it has a positive contribution margin.
B.it has unavoidable fixed costs.
C.there will be a positive change in income if the product line is dropped.
D.All of these answer choices are correct.
40.Which of the following statements is(are) true concerning common costs?
They are costs that are directly traceable to an individual product line.
They are normally avoidable.
I only
B.II only
C.Both Iand II
D.Neither I nor II
41.Which of the following is a direct cost of a specific department in a retail store?
A.Supplies used in cleaning the store
B.Rent of the store
C.Utilities used by the store, such as electricity
D.Cost of the department manager’s salary
42.When a department or product line is dropped, the common fixed costs that had been allocated to that department
A.are eliminated.
B.become variable costs.
C.are allocated to the remaining departments or product lines.
D.become sunk costs.
43.Harrison Enterprises currently produces 8,000 units of part B13. Current unit costs for part B13 are as follows:
Direct materials $12
Direct labor 9
Factory rent 7
Administrative costs 10
General factory overhead (allocated) 7
Total $45
If Harrison decides to buy part B13, 50% of the administrative costs would be avoided. All of the company’s items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Harrison for $31 per unit. What will occur if the company accepts the offer?
A.The cost for this part will increase by $5 per unit.
B.The cost for this part will be the same.
C.The cost for this part will decrease by $14 per unit.
D.The cost for this part will decrease by $10 per unit.
44.You have tickets to go to Jamaica over spring break. Just this week your best friend informs you that he (she) is getting married over spring break.Your friend would like you to stay back in the city and be the wedding attendant. The tickets to Jamaica are nonrefundable.
Which of the following is a sunk cost relating to your decision of attending the wedding or going on the trip to Jamaica?
A.The cost of the airline tickets to Jamaica
B.The cost of wedding gift
C.The cost of the clothing you will have to buy/rent to be in the wedding
D.The cost of the rent on your apartment for the month
45.Which of the following statements regarding opportunity costs is true?
A.Opportunity costs are recorded as an expense since they are a cost of accepting another option.
B.Opportunity costs are always incremental.
C.Opportunity costs are unavoidable.
D.The same decision will be reached whether or not opportunity costs are considered in an incremental analysis.
46.Samson Designers produces a lady’s handbag that normally sells for $120. The company produces 800 units annually but has the capacity to produce 1,100 units. An order from a customer has been received for 200 handbags at $85 each that would not disrupt current operations. Current costs for the handbag are as follows:
Direct materials $23.00
Direct labor 45.00
Variable overhead 7.00
Fixed overhead 12.00
Total $87.00
In addition, the customer would like to add a monogram to each bag which would require an additional $4 per bag in additional labor costs. Samson would also have to purchase a piece of equipment to create the monogram which would cost $800. This equipment would not have any other uses. Which statement is true with regard to this situation?
A.Incremental revenues will exceed incremental costs by $400.
B.Incremental revenues will exceed incremental costs by $1,200.
C.Incremental costs will exceed incremental revenues by $1,200.
D.Incremental costs will exceed incremental revenues by $2,000.
47. Speedo produces signature goggles which it sells for $35. The company produces 15,000 pairs of these goggles annually but has the capacity to produce 20,000. An order for manufacturing and selling 1,000 pairs at $25 has been received from the U.S. Olympic swim team that would not disrupt current operations. Current costs for the signature goggles are as follows:
Direct materials $6.00
Direct labor 10.00
Variable overhead 3.00
Fixed overhead 8.00
Total $27.00
In addition, the Olympic coach would like to add the U.S. Olympic logo to each pair which would require an additional $2 per pair of goggles in additional labor costs. The company would also have to rent a logo stamper to stamp the logo which would cost $600. Which statement is true with regard to this order?
A.Incremental profit will be $4,000.
B.Incremental costs will be $27,000.
C.Incremental costs will be $21,600.
D.Incremental costs will exceed incremental revenues by $4,600.
