Chap011 - Chapter 11 Relevant Costs for Decision Making...

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Unformatted text preview: Chapter 11 - Relevant Costs for Decision Making Chapter 11 Relevant Costs for Decision Making True / False Questions 1. The book value of old equipment is not a relevant cost in a decision. True False 2. One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. True False 3. A differential cost is a variable cost. True False 4. All future costs are relevant in decision making. True False 5. Variable costs are always relevant costs. True False 6. A sunk cost is a cost that has already been incurred but that can be avoided at least in part depending on the action a manager takes. True False 7. A cost that will be incurred regardless of which course of action a manager takes is relevant to the manager's decision. True False 11-1 Chapter 11 - Relevant Costs for Decision Making 8. Opportunity costs are recorded in the accounts of an organization. True False 9. In a decision to drop a segment, the opportunity cost of the space occupied by the segment would be the profit that could be derived from the best alternative use of the space. True False 10. Only the variable costs identified with a product are relevant in a decision concerning whether to eliminate the product. True False 11. Managers should pay little attention to bottleneck operations because they have limited capacity for producing output. True False 12. Defective units should be detected and scrapped or reworked after the bottleneck operation rather than before it. True False 13. A merchandising company that buys all of its inventory from outside suppliers is an example of a company that is vertically integrated. True False 11-2 Chapter 11 - Relevant Costs for Decision Making Multiple Choice Questions 14. For which of the following decisions are opportunity costs relevant? A. A B. B C. C D. D 15. Which of the following costs are always irrelevant in decision making? A. avoidable costs B. sunk costs C. opportunity costs D. fixed costs 16. For which of the following decisions are sunk costs relevant? A. the decision to keep an old machine or buy a new one. B. the decision to sell a product at the split-off point or after further processing. C. the decision to accept or reject a special order offer. D. all of the above. E. none of the above. 17. The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is: A. the variable manufacturing cost of the component. B. the total manufacturing cost of the component. C. the fixed manufacturing cost of the component. D. zero. 11-3 Chapter 11 - Relevant Costs for Decision Making 18. Allocated common fixed costs: A. can make a product line appear to be unprofitable....
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Chap011 - Chapter 11 Relevant Costs for Decision Making...

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