1)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
2) 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.
3) 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.
4) 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.