1. Which of the following costs are irrelevant to business decisions? A. Unavoid
ID: 2589169 • Letter: 1
Question
1. Which of the following costs are irrelevant to business decisions?
A. Unavoidable costs
B. Costs that differ between alternatives
C. Incremental costs
D. Variable costs
2. What decision rule should be followed when deciding whether a business segment should be dropped?
A. Segments generating a net loss should be dropped.
B. Segments with revenues that are more than avoidable expenses should be considered for elimination.
C. Segments with revenues that are less than unavoidable expenses should be considered for elimination.
D. Segments with revenues that are less than avoidable expenses should be considered for elimination.
3. Tubby’s Tubs has capacity to produce 10,000 tubs and expects to sell all it can make. Fixed costs are $300,000, and the unit variable cost for making and selling tubs is $50 per tub. At what price should Tubby sell each tub so that profits are 20% of total revenue?
A. $62.50
B. $96.00
C. $100.00
D. $120.00 cost.
D. differential cost.
Explanation / Answer
1 Unavoidable costs are irrelevant to business decisions 2 Segments with revenues that are less than avoidable expenses should be considered for elimination 3 Let the unit selling price be x (10000x-500000-300000) = 2000x 10000x-800000 = 2000x 8000x = 800000 x = $100 Selling price = $100
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