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InClassExercises-Chapter7 VF

# InClassExercises-Chapter7 VF - Managerial Accounting COMM...

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Managerial Accounting COMM 305 & ACCO 240 Prof. M. Brivot CHAPTER 7– Incremental Analysis True/False 1- The basic rule in a sell-or-process-further decision is: process further as long as the incremental revenue from such processing exceeds the incremental processing costs. True False 2- Book value is a sunk cost and is therefore relevant in incremental analysis of keep or replace equipment. True False 3-Opportunity costs are costs that have already been incurred and will not be avoided by any future decision. True False 4-Joint product costs are relevant for any sell-or-process-further decisions. True False Multiple Choice 1 - If revenues are \$315,000 under alternative A and \$324,000 under alternative B, and costs are \$285,000 for A and \$306,000 for B, then using the basic approach in incremental analysis, incremental revenues, costs, and net income, in comparing B to A are, respectively: a. \$9,000, \$(21,000), \$(12,000). b. \$(9,000), \$21,000, \$12,000. c. \$9,000, \$21,000, \$12,000. d. \$(9,000), \$(21,000), \$(12,000). 2- The cost to manufacture an unfinished unit is \$120 (\$90 variable, \$30 fixed). The selling price per unit is \$150. The company has unused productive capacity and has determined that units could be finished and sold for \$195 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit?

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