Incremental analysis identifies the probable effects of management decisions on future earnings.
TURE
The process used to identify the financial data that change under alternative courses of action is called incremental analysis.
TURE
A decision whether to continue to buy a product instead of producing it internally depends specifically on the incremental costs and incremental revenues of making the change.
F
A disadvantage of using an outside supplier is the associated loss of control over the production process.
T
Which steps do accountants mostly contribute to in the decision-making process?
Determining and evaluating possible courses of action and then reviewing the results of the decision.
Which one of the following is non-financial information that management might evaluate in making a decision?
the corporate profile in the community
Which of the following describes one aspect of incremental analysis?
Both costs and revenues that differ between alternate courses of action will be analyzed.
What is a sunk cost?
A cost that has already occurred and therefore is not relevant in the decision process.
For which of the following decisions is incremental analysis not appropriate?
elimination of an unprofitable segment;
a make or buy decision;
an allocation of limited resource decision
Which statement is true about relevant costs in incremental analysis?
All costs are relevant if they change between alternatives.
M&H Ltd. has sufficient capacity to fill an order at a special price below its usual price. The special price exceeds its variable costs. What non-financial factors should also be considered in the decision?
Is there the potential for additional sales to the customer in the future?
How will existing customers respond if they find out about the special price?
If there is the potential for additional sales to the customer in the future, can a higher price be ch
Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for $18.00 each. If Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12 per unit however $5 per unit is avoidable. Should Truckel make or bu
Make; savings = $10,000
In which situations should opportunity costs be considered?
decision making that involves alternative uses
Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make or buy decision. Which statement is true of the opportunity cost?
should be added to the "Make" costs
Which one of the following does not affect a make or buy decision?
incremental revenue
What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?
It is relevant since it reduces the cost of the new equipment.
The most important thing to consider when deciding to replace or keep equipment is
the expected variable costs of the new equipment.