Accounting_203_Chapter_11_Test

Accounting_203_Chapter_11_Test - ACCOUNTING 203 Chapter 11...

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ACCOUNTING 203 Chapter 11 Practice Test True and False Questions 1. Fixed costs are irrelevant in a decision. 2. Any cost that is avoidable is relevant for decision purposes. 3. Sunk costs are sometimes relevant in decision making. 4. Fixed costs that do not differ between alternatives are sunk costs. 5. The book value of a machine, as shown on the balance sheet, is relevant in a decision concerning the replacement of that machine by another machine. 6. Depreciation expense on existing factory equipment is generally relevant to a decision of whether to accept or reject a special offer for a company’s product. 7. Managers should not authorize working overtime at a workstation that contains a bottleneck. 8. An avoidable cost is a cost that can be eliminated (in whole or in part) as a result of eliminating a sunk cost. Multiple Choice Questions 9. Opportunity costs are: A) not used for decision making. B) the same as variable costs. C) the same as historical costs. D) relevant to decision making. 10. The opportunity cost of making a component part in a factory with no excess capacity is the: A) variable manufacturing cost of the component. B) fixed manufacturing cost of the component. C) total manufacturing cost of the component. D) net benefit foregone from the best alternative use of the capacity required. Everett Community College Tutoring Center 1
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11. Firestone Wall Company is considering renting Machine Y to replace Machine X. It is expected that Y will waste less direct materials than does X. If Y is rented, X will be sold on the open market. For this decision, which of the following factors is (area) relevant? I. Cost of direct materials used II. Resale value of machine X A) Only I B) Only II C) Both I and II D) Neither I nor II 12. When there is a production constraint, a company should emphasize the products
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Accounting_203_Chapter_11_Test - ACCOUNTING 203 Chapter 11...

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