Chapter 21: Incremental Analysis

Which of the following depicts the correct order of the steps in management's decision-making process?

determine and evaluate course of action, make a decision, evaluate the results.

Opportunity cost is

always a relevant cost

The focus of a sell or process further decision is

Incremental revenues & Incremental costs

An opportunity cost is

Is the potential benefit that may be obtained by following an alternative course of action.

If qualitative decisions involving incremental analysis are not easily measured they can safely be ignored.

false

sunk costs are analyzed during incremental analysis

false (differential revenues are)

What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?

Net income will decrease

Arlington Co. has excess capacity. Under what situations should the company accept a special order for less than the current selling price

when incremental revenues exceed incremental costs

Costs that will differ between alternatives and influence the outcome of a decision are

relevant costs

opportunity cost is usually a ____ cost

potential

From a quantitative standpoint, a segment should be eliminated if its contribution margin is greater than the fixed costs that can be eliminated.

false

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

the current disposal price of the old equipment