Question : 60.              The change in total cost, if one alternative implemented : 1369897

 

 

60.              The change in total cost, if one alternative is implemented instead of another, is referred to as:

A)incremental cost

B)opportunity cost

C)changing cost

D)joint cost

 

61.              The rule for making sound economic decisions is that one should choose the alternative with the

A)highest contribution margin

B)lowest opportunity cost

C)lowest sunk costs

D)highest revenue

 

62.   When deciding to purchase new equipment the cost of equipment being replaced is a(n):

A)sunk cost

B)incremental cost

C)opportunity cost

D)incremental revenue

 

63.              All of the following are steps in incremental analysis except:

A)identify the alternative actions

B)determine the incremental revenue

C)determine the relevant costs of each alternative

D)choose the alternative that produces the highest revenue

 

64.              When analyzing the incremental costs used to help make a short-term operating decision:

A)fixed costs are irrelevant

B)variable costs are irrelevant

C)both fixed costs and variable costs are relevant

D)incremental revenues are irrelevant

 

Use the following to answer questions 65-67:

 

JJ Enterprises currently manufactures two products, A and B. It is considering adding a new product, Product C. The following table shows current information for products A and B, as well as projected data for Product C.

 

*NOTE: If Product C is produced, one-fourth of the company’s common costs, which are fixed costs, will be allocated to Product C, with one-half and one-fourth allocated to products A and B, respectively.

 

 

65.              If JJ Enterprises adds Product C, the total incremental revenue will be:

A)$1,125,000

B)$  200,000

C)$    70,000

D)$     7,500

 

66.              If JJ Enterprises adds Product C, the total incremental cost will be:

A)$740,000

B)$330,000

C)$137,500

D)$130,000

 

 

 

 

67.              The incremental income in the decision whether or not to manufacture Product C is:

A)$200,000

B)$135,000

C)$ 70,000

D)$ 62,500

 

Use the following to answer questions 68-69:

 

Knockdown Products normally sells boxing gloves for $85 a pair. Knockdown just received a special order for 1,500 pair at a price of $50 a pair. To purchase, store, and ship the gloves, it costs a total of $55 a pair, which consists of $43 in variable costs and $12 in fixed costs.

 

68.              Assuming Knockdown has enough excess gloves on hand to fill the special order, it should:

A)reject the offer since income will decrease by $7,500

B)accept the offer since income will increase by $7,500

C)reject the offer since income will decrease by $10,500

D)accept the offer since income will increase by $10,500

 

69.              Assuming Knockdown has no way of purchasing any additional gloves, and, that accepting this order will mean losing an equivalent quantity of sales to regular customers, Knockdown should:

A)reject the offer since income will decrease by $7,500

B)accept the offer since income will increase by $7,500

C)reject the offer since income will decrease by $52,500

D)accept the offer since income will increase by $52,500

 

Use the following to answer questions 70-71:

 

Naui Industries produces flowered shirts which normally sell for $24 each. The total cost to manufacture each shirt is $17, which consists of $11 of variable costs and $6 of fixed costs. A hotel chain has approached Naui with a special order for 2,000 shirts at $15 each.