Chapter 7 Q&A

Chapter 7 Q&A - Q4: Suppose a lumber company spends...

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Q1 : True or False. Avoidable costs are always incremental costs. (Section 7.2) A1: True. Q2 : Because joint cost is __________ to production of an individual joint product, it is _________ to any decision regarding a joint product. (Section 7.2) A) incremental ; irrelevant B) incremental ; relevant C) not incremental ; irrelevant D) not incremental ; relevant A2 : C) not incremental; irrelevant Q3 : Which of the following is NOT a common decision faced by managers? (Section 7.2) A) The decision to make or buy a product. B) The decision to increase or decrease price. C) The decision to drop a product line. D) The decision to engage in additional processing. A3 : B) The decision to increase or decrease price.
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Unformatted text preview: Q4: Suppose a lumber company spends $500 for a mahogany log and an additional $30 to saw it into two grades of lumber. The process results in 700 feet of Grade A lumber and 700 feet of Grade B lumber. Grade A lumber sells for $3 per foot board and Grade B lumber sells for $1 per foot board. Use the Relative Sales Value method to calculate the amount of joint cost to be allocated to each type of lumber. (Section 7.3) A4: Joint cost allocated to Grade A : $530 x ($2100 / $2800) = $397.50 Joint Cost allocated to Grade B : $530 x ($700 / $2800) = $132.50 Q5: True or False. Fixed costs are never incremental. (Section 7.1) A5: False....
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Chapter 7 Q&A - Q4: Suppose a lumber company spends...

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