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11.Relevant costs in decision-making: 
 

A. are future costs that represent differences between decision alternatives.

B. result from past decisions.

C. should not influence the decision.

D. None of these.

12.A cost is considered relevant if: 
 

A. it is positive.

B. it is sunk.

C. it makes a difference.

D. if it can't be changed.

13.If a cost is irrelevant to a decision, the cost could not be a: 
 

A. fixed cost.

B. sunk cost.

C. differential cost.

D. variable cost.

14.The potential rental value of space used in the manufacturing process: 
 

A. is a variable production cost.

B. is an unavoidable production cost.

C. is a sunk production cost.

D. is an opportunity cost if production is not outsourced.

15.Greenland Sports, Inc. has been asked to submit a bid to the National Hockey League on supplying 1,000 pairs of professional quality skates. The cost per pair of skates has been determined as follows:

  

Other non-manufacturing costs associated with each pair of skates are:

  

Assume the commission on the sale of skates to the National Hockey League would be reduced to $15 per pair and that available production capacity exists to produce the 1,000 pairs of skates, the lowest price the firm can bid is some price greater than: 
 

A. $185.

B. $190.

C. $215.

D. $225.

16.The key to analyzing a sell as is or process further decision is to determine that: 
 

A. opportunity costs exceed sunk costs.

B. incremental revenues exceed incremental costs.

C. differential costs do not exist.

D. all allocated costs are included in the decision.

17.In a make or buy decision, which of the following costs would be considered relevant? 
 

A. avoidable costs.

B. unavoidable costs.

C. sunk costs.

D. allocated costs.

18.Which of the following qualitative factors favors the buy option in the make or buy decision? 
 

A. Production scheduling.

B. Utilization of idle capacity.

C. Ability to control quality.

D. Technical expertise of supplier.

19.Product Z sells for $18 per unit as is, but if enhanced it can be sold for $24 per unit. The enhancement process will cost $50,000 for 10,000 units. If the 10,000 units of Product Z are sold as is without further processing, the company: 
 

A. will incur an incremental profit of $10,000.

B. will incur an opportunity cost of $10,000.

C. will incur an incremental profit of $1 per unit.

D. will incur an incremental loss of $6 per unit.

20.A(n) _____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned. 
 

A. relevant cost

B. opportunity cost

C. incremental cost

D. target cost

16-1

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