CHAPTER 24
Review Quiz
True-False
T F
T F
T F
T F
1. Information used in short-run decision analysis should be relevant, timely, and
presented in a format that is easy to use in decision making.
2. Only financial information should be used in making short-run decisions.
3. Sunk costs are costs that are identical under all alternatives.
4. Fixed costs are always irrelevant in incremental analysis.
Multiple Choice
5. All the following are relevant in making a decision about whether to hunt for buried treasure
except the
a. expected market value of the treasure.
b. additional insurance premiums that must be paid to cover the expedition.
c. cost of special equipment that must be purchased to dig and retrieve items.
d. sunk cost of existing shovels.
e. All the above are relevant.
6.Classic Writing Company makes a regular pen and a deluxe pen. Data for the two pens are as
follows:
Regular
Deluxe
Sales price per unit
$5.50
$7.00
Variable cost per unit
2.00
4.00
Allocated fixed costs per unit
1.50
1.50
Sales demand in units
5,000
4,000
Machine hours required per unit
.7
.5
Assume that machine hours are a constraining factor in the short run. What is the contribution
margin per machine hour for the deluxe pen?
a. $6.00
b. $3.00
c. $1.50
d. $.0015
e. None of the above
7.Assume that the total fixed costs described in 6 will not be changed by any change in the sales
mix. How many units of each product should be produced and sold if machine hours are
limited to 3,400?
Regular
Deluxe
a.
0 units
4,000 units
b. 1,400 units
2,000 units
c. 2,000 units
4,000 units
d. 5,000 units
0 units
e. None of the above
8.A sell or process-further decision considers
a. all costs incurred.
Copyright © Houghton Mifflin Company. All rights reserved.
b.
c.
d.
e.
costs incurred before the split-off point.
costs incurred after the split-off point.
only the common or joint costs incurred.
none of the above.
9.As a general rule, a segment should not be eliminated if the
a. organization is earning a profit.
b. segment’s contribution margin exceeds direct fixed costs.
c. segment’s sales revenue is greater than its variable costs.
d. fixed costs that will be avoided by eliminating the segment exceed the segment’s
contribution margin.
e. segment margin is negative.
10. When considering a special order that will enable a company to make use of its excess
capacity, all the following are relevant except
a. direct materials costs.
b. direct labor costs.
c. incremental fixed costs.
d. fixed costs that will continue whether or not the order is accepted.
e. All the above are relevant.