Module_17_Multiple_Choice_Ans

Module_17_Multiple_Choice_Ans - Module 17 Multiple Choice...

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Module 17 Multiple Choice MC17-1 Relevant Costs Defined LO1 Relevant costs are best described as: Solution b. Costs that do not differ between competing decision alternatives are not relevant; only those that differ are relevant. MC17-2 Irrelevant Cost LO1 If a cost is identical under each alternative under consideration within a given decision context, the cost is considered: Solution d. Costs that do not differ between competing decision alternatives are not relevant; only those that differ are relevant. MC17-3 Outlay Costs LO1 ___________ are costs that require future expenditures of cash or other resources. Solution d. Only future costs that will be incurred are outlay costs, as opposed to past sunk costs. MC17-4 Outlay Costs LO1 An outlay cost is not relevant if it: Solution a. If an outlay cost will be incurred under all competing alternatives, then it is not relevant. MC17-5 Sunk Costs LO1 Which of the following statements about sunk costs is true? Solution d. Since sunk costs have already been incurred in the past and cannot be reversed, they are the same for all alternatives and are never relevant. MC17-6 Outsourcing LO1 The external acquisition of services or components is called: Solution c. External acquisition, as opposed to internal production, is referred to outsourcing. MC17-7 Sunk Cost LO1 The Titanic hit an iceberg and sank. In deciding whether or not to salvage the ship, its book value is a(n): Solution b. The past cost of the ship has already been incurred and is an irrelevant sunk cost. MC17-8 Relevant Costs LO1 ©Cambridge Business Publishers, 2008 st Edition
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Future costs that differ among competing alternatives are: Solution b. Only future costs that are different among competing alternatives are relevant. MC17-9 Relevant Costs LO1 Which of the following statements is TRUE when making a decision between two alternatives? Solution c. Future fixed costs and taxes are relevant if they differ among alternatives, as are variable costs for alternatives with different activity levels. Variable costs are relevant if competing alternatives have different activity levels. MC17-10 Make or Buy Decision LO3 The Chat Company manufactures 2,500 telephones per year. The full manufacturing costs per telephone are as follows: Direct materials $ 4 Direct labor 16 Variable manufacturing overhead 10 Average fixed manufacturing overhead 10 Total $40 The Electric Assembly Company has offered to sell Chat 2,500 telephones for $34 per unit. If Chat accepts the offer, $20,000 of fixed overhead will be eliminated. Chat should: Solution b. Relevant cost to manufacture = (4 + 16 + 10) + (20,000/2,500) = $38 per unit. By buying the phones, the savings is $4 per phone or $10,000 total. MC17-11
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This note was uploaded on 02/23/2011 for the course ACC 500 taught by Professor Richards during the Spring '08 term at BC.

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Module_17_Multiple_Choice_Ans - Module 17 Multiple Choice...

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