1. The process used to identify the financial data that changes under alternative courses of action is called incremental analysis.
A.True
B.False


2. Opportunity cost is a cost that cannot be changed by any present or future decision.
A.True
B.False


3. Sunk costs are not relevant in incremental analysis.
A.True
B.False


4. When a company has limited resources, management must decide which products to make and sell in order to maximize sales.
A.True
B.False


5. Only quantitative factors should be used when making decisions that require incremental analysis.
A.True
B.False


6. Accounting's contribution to the decision-making process occurs in all of the following steps except
A.Identify the problem.
B.Determine possible courses of action.
C.Review results of the decision.
D.Accounting makes a contribution in all of the above.


7. All of the following types of decisions involve incremental analysis except
A.Make or buy.
B.Retain of replace equipment.
C.Sell or process further.
D.All of these options.


8. Relevant costs in accepting an order at a special price include all of the following except
A.Direct materials.
B.Direct labor.
C.Fixed manufacturing overhead.
D.Variable manufacturing overhead.


9. Which one of the following is an important assumption that is made when considering the decision to accept an order at a special price?
A.There are no mixed costs.
B.The firm is not currently operating at full capacity.
C.Overall economic growth will continue at historical rates.
D.The firm will continue to receive similar orders in the future.


10. In a make or buy decision, opportunity costs are
A.Added to the make total cost.
B.Deducted from the make total cost.
C.Added to the buy total cost.
D.Ignored.


11. Another name for the option to buy a component from a supplier is
A.vertical integration.
B.supply chain management.
C.outsourcing.
D.insourcing.


12. The basic rule in a sell or process further decision is to process further as long as the incremental revenue is
A.Equal to the incremental processing costs.
B.Less than the incremental processing costs.
C.More than the incremental processing costs.
D.More than the manufacturing cost per unit.


13. When a firm operates in a multiple-product environment, joint costs should be treated as __________________ and ignored in the decision to sell or process further.
A.opportunity costs.
B.variable costs.
C.incremental costs.
D.sunk costs.


14. In a retain or replace equipment decision, all of the following are considered except the
A.Salvage value of the old asset.
B.Book value of the old asset.
C.Cost of the new asset.
D.Decrease in variable manufacturing costs.


15. All of the following are relevant in deciding whether to eliminate an unprofitable segment except the segment's
A.Sales.
B.Variable expenses.
C.Contribution margin.
D.Fixed expenses.


16. When a segment of a business, the fixed costs allocated to the eliminated segment
A.disappear.
B.must be absorbed by the remaining segments
C.are written off.
D.are allocated to the firm that buys the eliminated segment.


17. A cost that cannot be changed by any present or future decision is a (an)
A.Fixed cost.
B.Opportunity cost.
C.Sunk cost.
D.Variable cost.


18. When a company has limited resources, the product to make and sell is the one with the highest
A.Contribution margin per unit.
B.Contribution margin per unit of limited resource.
C.Contribution margin rate.
D.Markup.


19. When considering sales mix, assuming that all other variables stay constant, the change that is likely to increase net income by the greatest amount is
A.decreasing low contribution margin unit sales
B.increasing low contribution margin unit sales
C.decreasing high contribution margin unit sales
D.increasing high contribution margin unit sales


20. Which of the following is a true statement about qualitative factors involved in making decisions involving incremental analysis?
A.Qualitative factors should be carefully considered in making decisions involving incremental analysis.
B.There are no negative, qualitative effects of eliminating one of a firm's manufacturing plants.
C.Because qualitative factors cannot be easily measured, they should be ignored in making decisions involving incremental analysis.
D.The morale of laid-off employees will improve with a decision to shut down the plant where they work because even though they don't have a job, they know the firm will be more profitable.



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