Multiple choice – Accounting P

A) Irrelevant costs include costs that are:
1 different among alternatives.
2 avoidable.
3 sunk.
4 opportunity costs.

b) The difference in total costs between two alternatives is referred to as the:
1 direct cost.
2 incremental cost.
3 sunk cost.
4 opportunity cost.

c) The purpose of incremental analysis is to find the alternative:
1 that contributes the most to operating income.
2 that brings in the most revenue.
3 with the lowest fixed costs.
4 with the fewest relevant costs.

d) In a special-order decision, which of the following costs would normally be irrelevant?
1 Packaging costs
2 Direct labor
3 Variable overhead
4 Fixed selling expenses

e) Avoidable costs are important for:
1 product mix decisions.
2 sell or process-further decisions.
3 decisions to eliminate unprofitable segments.
4 pricing decisions for special orders.

f) Direct costs include:
1 all product costs.
2 variable product costs.
3 some identifiable fixed costs and variable product costs.
4 some identifiable fixed costs.

g) As a general rule, a segment should not be eliminated if:
1 the company is profitable.
2 its direct fixed costs exceed its contribution margin.
3 the segment’s fixed costs equal its variable costs.
4 its contribution margin exceeds direct fixed costs.

h) The point at which products are separated in a joint production process is the:
1 split-off point.
2 joint product point.
3 separation point.
4 breakeven point.

i) Relevant costs in a sell or process-further decision include:
1 costs of additional processing.
2 both additional revenues and additional costs.
3 revenues after additional processing.
4 joint product costs.

j) The objective of the sell or process-further decision is to:
1 maximize production.
2 maximize joint costs.
3 minimize processing.
4 maximize operating income