Chapter 13 Relevant Costs for Decision Making

Chapter 13 Relevant Costs for Decision Making - Chapter 13...

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Unformatted text preview: Chapter 13 Relevant Costs for Decision Making 652 Garrison, Managerial Accounting, 12th Edition True/False Questions 1. Fixed costs are sunk costs and are therefore irrelevant in decisions. Answer: False Level: Easy LO: 1 2. A complete income statement must be prepared as part of a differential cost analysis. Answer: False Level: Medium LO: 1 3. Future costs that do not differ between the alternatives in a decision are avoidable costs. Answer: False Level: Medium LO: 1 4. The book value of an old machine is always considered a sunk cost in a decision. Answer: True Level: Easy LO: 1 5. A product that does not cover its allocated share of general corporate administrative expenses should be dropped. Answer: False Level: Easy LO: 2 6. In a decision to drop a product, the product should be charged for rent in proportion to the space it occupies even if the space has no alternative use and the rental payment is unavoidable. Answer: False Level: Easy LO: 2 7. Making rather than buying a part that goes into one of the company's products would increase the company's degree of vertical integration. Answer: True Level: Easy LO: 3 8. In a special order situation that involves using existing idle capacity, opportunity costs are zero. Answer: True Level: Easy LO: 4 Chapter 13 Relevant Costs for Decision Making Garrison, Managerial Accounting, 12th Edition 653 9. When a company has a production constraint, the product with the highest contribution margin per unit of the constrained resource should be given highest priority. Answer: True Level: Easy LO: 5 10. Payment of overtime to a worker in order to relax a production constraint could increase the profits of a company. Answer: True Level: Medium LO: 5 11. In a plant operating at capacity, every machine and person in the plant would be working at the maximum possible rate. Answer: False Level: Hard LO: 5 12. Lumber produced in a lumber mill results in several different products being produced from each log; such products are called joint products. Answer: True Level: Easy LO: 6 13. In a sell or process further decision, an avoidable fixed production cost incurred after the split-off point is relevant to the decision. Answer: True Level: Medium LO: 6 14. Joint processing after the split-off point is profitable if the incremental revenue from such processing exceeds the incremental processing costs. Answer: True Level: Easy LO: 6 15. A cost that is traceable to a segment through activity-based costing is always an avoidable cost for decision making. Answer: False Level: Easy LO: 1 Chapter 13 Relevant Costs for Decision Making 654 Garrison, Managerial Accounting, 12th Edition Multiple Choice Questions 16. Hal Etoesus currently works as the fry guy at Burger Breath Drive Thru but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost in this decision?...
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Chapter 13 Relevant Costs for Decision Making - Chapter 13...

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