Question 1

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

• provide relevant revenue and cost data about each course of action
• decide which actions that management should consider
• determine the amount of money that should be spent on a project.
• assign responsibility for the decision

Question 2

In incremental analysis

• only costs are analyzed
• only revenues are analyzed.
• both costs and revenues may be analyzed
• both costs and revenues that stay the same between alternate courses of action will be analyzed

Question 3

Incremental analysis is most useful

• in developing relevant information for management decisions.
• In evaluating the master budget
• as a replacement technique for variance analysis.
• in choosing between the net present value method and the internal rate of return method

Question 4

It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?

• $12,000 decrease
• $60,000 increase
• $8,000 increase
• $8,000 decrease

Question 5

Carter, Inc. can make 100 units of a necessary component part with the following costs:

Direct materials $120,000
Direct Labor 20,000
Variable
Overhead 60,000
Fixed overhead 40,000

If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or buy decision?

• Make and save $30,000
• Buy and save $10,000
• Make and save $10,000
• Buy and save $30,000

Question 6

Mink Manufacturing is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Mink would sell it for $130. The cost to assemble the product is estimated at $42 per unit and the company believes the market would support a price of $170 on the assembled unit. What decision should Mink

• Sell before assembly, the company will be better off by $40 per unit
• Process further, the company will be better off by $58 per unit
• Process further, the company will be better off by $28 per unit
• Sell before assembly, the company will be better off by $2 per unit

Question 7

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost

• The loss on the disposal of the old equipment
• The current disposal price of the old equipment
• The book value of the old equipment
• Depreciation expense on the old equipment