Ch 10 Acc 240

In a make-or-buy decision, relevant costs include: A.) unavoidable fixed costs B.) avoidable fixed costs C.) fixed factory overhead costs applied to products D.) fixed selling and administrative expenses

B.) avoidable fixed costs

Two or more products produced from a common input are called: A.) common costs. B.) joint products. C.) joint costs. D.) sunk costs.

B.) joint products.

Defective units should be detected and scrapped or reworked before the bottleneck operation rather than after it. T/F

True

Fixed costs may or may not be sunk costs. T/F

True

In a decision to drop a product, the product should not be charged for factory rent if the space in which the product is produced has no alternative use and the rental payment is unavoidable. T/F

True

In a special order situation, any fixed cost that could be avoided if the special order were not accepted would be irrelevant. T/F

True

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

True

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

True

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/F

True

When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on: A.) selling price per unit B.) contribution margin per unit C.) contribution margin per unit of the constraining resource D.) unit sales volume

C.) contribution margin per unit of the constraining resource

Opportunity costs are: A.) not used for decision making. B.) the same as variable costs. C.) the same as historical costs. D.) relevant in decision making.

D.) relevant in decision making.

A fixed cost cannot be a differential cost. T/F

False

A vertically integrated company is more dependent on its suppliers than a company that is not vertically integrated. T/F

False

Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks. T/F

False

In a decision to drop a segment, the opportunity cost of the space occupied by the segment is the cost of renting or building similar space nearby. T/F

False

Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further. T/F

False

Joint products are products that are sold to customers as a set or as part of a group of products. T/F

False

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

False

When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource. T/F

False