Question : 31. When considering whether a business segment should be eliminated, : 1256765

31. When considering whether a business segment should be eliminated, unavoidable expenses are amounts that will continue even if a given segment is eliminated.

Multiple Choice Questions

32. An opportunity cost:A.  Is an unavoidable cost.B.  Requires a current outlay of cash.C.  Results from past managerial decisions.D.  Is the lost benefit of choosing an alternative course of action.E.  Is irrelevant in decision making.

33. An additional cost that is incurred only if a particular action is taken is a(n):A.  Period costB.  Pocket costC.  Discount costD.  Incremental costE.  Sunk cost.

34. The potential benefit of one alternative that is lost by choosing another is known as a(n):A.  Alternative costB.  Sunk costC.  Out-of-pocket costD.  Differential costE.  Opportunity cost

35. A cost that requires a current and/or future outlay of cash, and is usually an incremental cost, is a(n):A.  Out-of-pocket costB.  Sunk costC.  Opportunity costD.  Operating costE.  Uncontrollable cost

36. A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):A.  Uncontrollable costB.  Incremental costC.  Opportunity costD.  Out-of-pocket costE.  Sunk cost

37. A company paid $200,000 10 years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $10,000 depreciation on the machine is an example of a(n):A.  Incremental costB.  Opportunity costC.  Variable costD.  Sunk costE.  Out-of-pocket cost

38. A company paid $400,000 five years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $40,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $48,000 per year and annual cash expenses of $30,000. In analyzing the new project, the $40,000 depreciation on the machine is an example of a(n):A.  Incremental costB.  Opportunity costC.  Variable costD.  Sunk costE.  Out-of-pocket cost

39. A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next five years. The $19,000 cost is an example of a(n):A.  Sunk costB.  Fixed costC.  Incremental costD.  Uncontrollable costE.  Opportunity cost

40. Patrick Corporation inadvertently produced 10,000 defective personal radios. The radios cost $8 each to produce. A salvage company will purchase the defective units as they are for $3 each. Patrick’s production manager reports that the defects can be corrected for $5 per unit, enabling them to be sold at their regular market price of $12.50. Patrick should:A.  Sell the radios for $3 per unit.B.  Correct the defects and sell the radios at the regular price.C.  Sell the radios as they are because repairing them will cause their total cost to exceed their selling price.D.  Sell 5,000 radios to the salvage company and repair the remainder.E.  Throw the radios away.