Chapter 12

A vertically integrated company is more dependent on its suppliers than a company that is not vertically integrated

F

Future costs that do not differ between the alternatives in a decision are avoidable costs.

F

One of the advantages of allocating common fixed costs to a product is that such allocations more accurately reflect the product's true profitability

F

The book value of old equipment is a relevant cost in a decision to replace that equipment. (Ignore taxes.

F

When a company is involved in only one activity in the entire value chain, it is vertically integrated

F

A cost that is relevant in one decision may not be relevant in another decision.

T

Fixed costs may or may not be relevant in decisions about whether a product should be dropped

T

Only future costs that differ between alternatives are relevant in decision making.

T

Opportunity costs are not usually recorded in the accounts of a business.

T

The book value of a machine, as shown on the balance sheet, is not relevant in a decision concerning the replacement of that machine by another machine. (Ignore taxes.)

T