Question :
6.3 Questions
1) If a department in a department store under : 1419228
6.3 Questions
1) If a department in a department store is under consideration to be eliminated, unavoidable fixed expenses are ________ to the decision.
A) incremental
B) marginal
C) relevant
D) irrelevant
2) Department A covers one section of a large factory building. Which of the following costs is relevant to the decision to eliminate Department A?
A) Heating expenses of building allocated to Department A
B) General corporate overhead allocated to Department A
C) Depreciation Expense on store building allocated to Department A
D) Salary Expense of Supervisor in Department A; he only works in Department A
3) If a department in a grocery store is under consideration to be eliminated, which of the following cost(s) is(are) NOT relevant to the decision?
A) avoidable fixed expenses
B) unavoidable costs
C) common costs
D) B and C
4) If a department in a department store is eliminated, ________ costs will not continue.
A) unavoidable
B) common
C) corporate
D) avoidable
5) Central Industries has three product lines: A, B and C. The following information is available:
Product A Product B Product C
Sales$100,000$90,000$44,000
Variable costs76,00048,00035,000
Contribution margin24,00042,0009,000
Avoidable fixed costs9,00018,0003,000
Unavoidable fixed costs6,0009,0007,700
Operating income(loss) $9,000$15,000$(1,700)
Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C and does not replace it. What will happen to operating income?
A) increase by $600
B) increase by $2,400
C) decrease by $6,000
D) decrease by $9,000
6) Sahara Industries has three product lines: A, B and C. The following annual information is available:
Product A Product B Product C
Sales$100,000$90,000$88,000
Variable costs76,00048,00079,000
Contribution margin24,00042,0009,000
Avoidable fixed costs9,00018,0003,000
Unavoidable fixed costs6,0009,0009,400
Operating income(loss) $9,000$15,000$(3,400)
Sahara Industries is thinking about dropping Product C because it is reporting a loss. Assume Sahara Industries drops Product C and the space formerly used to produce Product C is rented out for $15,000 per year. What will happen to operating income?
A) increase by $6,600
B) increase by $9,000
C) increase by $14,400
D) increase by $15,000
7) Cesar Company has three product lines: A, B and C. The following annual information is available:
Product A Product B Product C
Sales$100,000$90,000$44,000
Variable costs76,00048,00035,000
Contribution margin24,00042,0009,000
Avoidable fixed costs9,00018,0003,000
Unavoidable fixed costs6,0009,0007,700
Operating income(loss) $9,000$15,000$(1,700)
Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without increasing fixed costs. What will happen to operating income?
A) increase by $15,000
B) increase by $24,000
C) increase by $36,000
D) increase by $42,000
8) Bally Company has three product lines: A, B and C. The following annual information is available:
Product A Product B Product C
Sales$60,000$90,000$24,000
Variable costs36,00048,00020,000
Contribution margin24,00042,0004,000
Avoidable fixed costs9,00018,0003,000
Unavoidable fixed costs6,0009,0002,400
Operating income(loss) $9,000$15,000$(1,400)
Assume Bally Company drops Product C. What will happen to operating income?
A) increase by $1,400
B) increase by $3,800
C) decrease by $1,000
D) decrease $1,400
9) The most recent income statement for the Venetian Branch of Palm Harbor Bank is presented below:
Sales$57,000
Variable costs31,500
Contribution margin25,500
Avoidable fixed costs13,500
Unavoidable fixed costs20,000
Operating loss$(8,000)
Palm Harbor Bank is thinking about eliminating the Venetian Branch. If the branch is eliminated, Palm Harbor Bank's operating income will ________.
A) increase by $8,000
B) increase by $25,500
C) decrease by $12,000
D) decrease by $31,500
10) The most recent income statement for the South Branch of First Financial Bank is presented below:
Sales$57,000
Variable costs31,500
Contribution margin25,500
Avoidable fixed costs13,500
Unavoidable fixed costs18,000
Operating loss$(6,000)
First Financial Bank is thinking about eliminating the South Branch. If the branch is eliminated, First Financial Bank's operating income will ________.
A) increase by $6,000
B) increase by $25,500
C) decrease by $12,000
D) decrease by $31,500
