Question 1 Costs that change as a result of selecting one course of action over

Question

Question 1

Costs that change as a result of selecting one course of action over another are referred to as:

Question options:

a)

Sunk costs.

b)

Variable costs.

c)

Incremental costs.

d)

Opportunity costs.

Question 4

t

The acceptance of a special order will improve net income whenever the revenue from the special order exceeds:

Question options:

a)

The variable costs of producing the order.

b)

The incremental cost of producing the order.

c)

The cash expenditure of producing the order.

d)

The marginal cost of producing one unit.

Question 5

Westport Ironworks has 10 furnaces which do not meet newly enacted "clean air" statutes. The furnaces must either be modified or replaced. Which of the following is least relevant to the decision as to whether to modify or replace the furnaces?

Question options:

a)

The price for which the furnaces can be sold in "as is" condition.

b)

The cost to modify the furnaces to meet the clean air statutes.

c)

The current book value of the furnaces.

d)

The cost of new furnaces that meet the clean air statutes.

Question 6

The Mazor Company manufactures 10,000 air filters per year. Each filter normally sells for $8 and has a contribution margin of $3. A special order for 2,000 filters at a reduced selling price of $6 would:

Question options:

a)

Increase operating income by $2,000.

b)

Decrease operating income by $4,000.

c)

Decrease operating income by $10,000.

d)

Increase operating income by $6,000.

Question

7

Tech, Inc., started out selling educational software to college students. Now, however, the company earns a large portion of its revenue from developing new business software. Tech's output is constrained by a limited availability of programming hours. Which of the following is not relevant in deciding which line of software to develop?

Question options:

a)

The contribution margin per programming hour of each product line.

b)

Commitments to numerous school systems to develop new educational software.

c)

The principal stockholder's personal commitment to meeting the needs of the educational community.

d)

None of the above. Each of these considerations is relevant to the decision.

Question 1

Explanation / Answer

3 Opportunity cost is the cost of forgetting one benefit to choose other option. The correct option is d) opportunity Cost 4 If revenue exceeds the increamental order then it will have more net income The correct option is B) The increamental cost of producing the order 6 Contribution with special order Selling rpice 6 Variable cost 5 (8-3) Contribution 1 Total increamental income 1*2000 = $ 2000 The correct option is a) Increase operating income by $2,000.

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