1. Bates Company plans to add a new item to its line of consumer product offerin
ID: 2463768 • Letter: 1
Question
1. Bates Company plans to add a new item to its line of consumer product offerings. Two possible products are under consideration. Each unit of Product A costs $6 to produce and has a contribution margin of $3, while each unit of Product B costs $12 and has a contribution margin of $4. What is the differential revenue for this decision?
a. $7
b. $1
c. $6
d. $9
2. Relevant costs are often referred to as:
a. Unavoidable costs
b. Differential costs
c. Sunk costs
d. All of these
3. Which of the following statements is true?
a. Fixed costs are sometimes relevant for decision making.
b. Opportunity costs are never relevant to decision making.
c. Information must be exactly accurate to be relevant to decision making.
d. A cost that is relevant in one decision context is relevant in other decision contexts.
Explanation / Answer
b.$1
the differential revenue for this decision=CM(A-B)per unit
2.b. Differential costs
A relevant cost (also called avoidable cost or differential cost) is a cost that differs ... It is often important for businesses
3.c. Information must be exactly accurate to be relevant to decision making.
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