LOA4-Mini quiz 1

It is always better to sell now rather than process further because of the time value of money.

• False

• Not clear

• True

The basic decision rule in a sell or process further decision is: process further if the incremental revenue from processing exceeds the incremental processing costs.

 

• false

• true

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

• not clear

• true

• false

Many of the decisions involving incremental analysis have qualitative features, but since they are not easily measured they should be ignored.

 

• false

• not always

• true

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

•       assign responsibility for the decision.

•             provide relevant revenue and cost data about each course of action.

• determine the amount of money that should be spent on a project.

Which of the following will always be a relevant cost?

• Fixed cost

• Sunk cost

• Variable cost

• Opportunity cost

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

• product costs.

• opportunity cost

• relevant costs.

• sunk costs.

Alvarez 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

•       $4,000

• 0

• $6,000

MixueDrink Division has the following information:

Sales                                              $1,200,000

Variable expenses                              640,000

Fixed expenses                                   620,000

If this division is eliminated, the fixed expenses will be allocated to the company’s other divisions. What is the incremental effect on net income if the division is dropped?

• $60,000 increase

• $560,000 increase

• $560,000 decrease

• 210,000 increase

A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued,

• the contribution margin of the product line will indicate the net income increase or decrease.

• total net income will increase by the amount of the product line’s fixed costs.

• total net income will decrease by the amount of the product line’s fixed costs.

• the company’s total fixed costs will decrease.