Exam 8 (Chapter 10)

A fixed cost is relevant if it is
a. uncontrollable.
b. avoidable.
c. sunk.
d. a product cost.

b. avoidable.

Relevant costs are
a. all fixed and variable cost.
b. all costs that would be incurred within the relevant range of production.
c. past costs that are expected to be different in the future.
d. anticipated future costs that will differ among various alter

d. anticipated future costs that will differ among various alternatives.

Which of the following is the LEAST likely to be a relevant item in deciding whether to replace an old machine?
a. acquisition cost of the old machine.
b. outlay to be made for the new machine.
c. annual savings to be enjoyed on the new machine.
d. life o

a. acquisition cost of the old machine.

The term incremental cost refers to
a. the profit foregone by selecting one choice instead of another.
b. the additional cost of producing or selling another product or service.
c. a cost that continues to be incurred in the absence of activity.
d. a cost

b. the additional cost of producing or selling another product or service.

A cost is sunk if it
a. is not an incremental cost.
b. is unavoidable.
c. has already been incurred.
d. is irrelevant to the decision at hand.

c. has already been incurred.

In deciding whether an organization will keep an old machine or purchase a new machine, a manager would ignore the
a. estimated disposal value of the old machine.
b. acquisition cost of the old machine.
c. operating costs of the new machine.
d. estimated

b. acquisition cost of the old machine.

The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is
a. the total manufacturing cost of the component.
b. the total variable cost of the component.
c. the fixed manufacturing cost of co

d. zero.

Which of the following are relevant in a make or buy decision?
Variable costs ; Avoidable fixed costs ; Unavoidable fixed costs
a. no ; yes ; yes
b. yes ; no ; yes
c. no ; no ; yes
d. yes ; yes ; no

d. yes ; yes ; no

In a make or buy decision, the reliability of a potential supplier is
a. an irrelevant decision factor.
b. relevant information if it can be quantified.
c. an opportunity cost of continued production.
d. a qualitative decision factor.

d. a qualitative decision factor.

Which of the following qualitative factors favors the buy choice in a make or buy decision for a part?
a. maintaining a long-term relationship with supplies
b. quality control is critical
c. utilization of idle capacity
d. part is critical to product

a. maintaining a long-term relationship with supplies

Contracting with vendors outside the organization to obtain or acquire goods and/or services is called
a. target costing.
b. insourcing.
c. outsourcing.
d. product harvesting.

c. outsourcing.

Which of the following activities within an organization would be LEAST likely to be outsourced?
a. accounting
b. data processing
c. transportation
d. product design

d. product design

Which of the following costs is IRRELEVANT in making a decision about a special order price if some of the company facilities are currently idle?
a. direct labor
b. equipment depreciation
c. variable cost of utilities
d. opportunity cost of production

b. equipment depreciation

Assume a company produces three products: A, B, and C. It can only sell up to 3,000 units of each product. Production capacity is unlimited. The company should produce the product (or products) that has (have) the highest
a. contribution margin per hour o

c. contribution margin per unit.

When a company discontinues a segment, total corporate costs may decrease in all of the following categories EXCEPT
a. variable production cost.
b. allocated common costs.
c. direct fixed costs.
d. variable period costs.

b. allocated common costs.