Problem 1: Which one of the following is non financial information that management might evaluate in making a decision?
A) opportunity cost of a decision
B) contribution margin
C) the effect on profit of a decision
D) the corporate profile in the community.
Problem 2: For which of the following decision is incremental analysis not appropriate?
A) determining cost behavior
B) an allocation of limited resource decision
Problem 3: It costs fortune company 12 for variable and 5 of fixed costs to produce one bathroom scale which normally sells for 35.00. A foreign wholesaler offers to purchase 1000 scales at 15.00 each. Fortune would incur special shipping costs of 1 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1000 scales if the special order is accepted, what will be the effect on net income?
A) 2000 increase
B) 2000 decrease
C) 3000 decrease
D) 15000 increase
Problem 4: What role does a trade in allowance on old equipment play in a decision to retain or replace equipment?
A) it relevant since it increases the cost of the new equipment
B) It is not relevant since it reduces the cost of old equipment
C) it is not relevant to the decision since it does not impact the cost of the new equipment
D) it is relevant since it reduces the cost of the new equipment
Problem 5: Which one of the following is possible if Hollywood video cuts its DVD rental rates by 20%?
A) its fixed costs will decrease
B) its profit will decrease by 20%
C) total costs increase
D) a profit can be earned by increasing the number of videos returned.
Problem 6: Which of the following is a consideration of CVP analysis?
A) the level of activity must remain constant over the relevant range
B) the total fixed costs remain constant over the relevant range
C) total variable cost remain constant over the relevant range
D) cost behavior can change as long as total cost remain the same at all activity levels.
Problem 7: The computation of absorption costing gross profit always involves subtracting
A) all current year fixed manufacturing overhead
B) some but not all current year fixed manufacturing overhead
C) all fixed manufacturing overhead applied to units sold in the current year
D) no fixed manufacturing overhead.