Incremental analysis LOA3-2023

In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain constant.

 

• false

• true

• not clear

Decision-making involves choosing among alternative courses of action.

 

• False

• true

• not clear

A special one-time order should never be accepted if the unit sales price is less than the unit variable cost.

• true

• false

If a company has excess capacity and present markets will not be affected, it would be profitable to accept an order at a special unit price even though the price is less than the unit variable cost to manufacture the item.

• true

• false

• not clear

If a company is operating at less than capacity, the incremental costs of a special order will likely include variable manufacturing costs, but not fixed costs.

• false

• true

Which of the following will always be a relevant cost?

• Sunk cost

• Fixed cost

• Variable cost

• Opportunity cost

Costs that will differ between alternatives and influence the outcome of a decision are

• sunk costs.

• product costs.

• unavoidable costs.

• relevant costs.

Candy Company is considering the following alternatives:

                                            Alternative A           Alternative B

Revenues                  $50,000                 $60,000

Variable costs              30,000                   30,000

Fixed costs                  10,000                   16,000

What is the incremental profit?

•       $10,000

•   $6,000

•   $4,000

•    $0

Which of the following is an irrelevant cost?

• An avoidable cost

• An opportunity cost

• An incremental cost

•   A sunk cost

Incremental analysis is most useful

• in developing relevant information for management decisions.

• b.   in choosing between capital budgeting methods.

• c.   in evaluating the master budget.

• d.   as a replacement technique for variance analysis.