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Multiple Choice Questions

1.The method of evaluating financial data that change under different courses of action is called: 
 

A. financial statement analysis.

B. break-even analysis.

C. incremental analysis.

D. cost-benefit analysis.

2.Braizen, Inc. produces a product with a $30 per-unit variable cost and an $80 per-unit sales price. Fixed manufacturing overhead costs are $100,000. The firm has a one-time opportunity to sell an additional 1,000 units at $60 each that would not affect its current sales. Assuming the company has sufficient capacity to produce the additional units, how would the acceptance of the special order affect net income? 
 

A. Income would decrease by $30,000.

B. Income would increase by $30,000.

C. Income would increase by $140,000.

D. Income would increase by $40,000.

3.Opportunity costs are: 
 

A. included in inventory.

B. foregone benefits.

C. sunk costs.

D. included in cost of goods sold.

4.A sunk cost is a cost that: 
 

A. has been incurred and cannot be eliminated.

B. is never relevant in decision-making.

C. is never a differential cost.

D. all of these.

5._____________ is a cost management technique in which the firm determines the required cost for a product or service in order to earn a desired profit when the marketplace establishes the product's selling price: 
 

A. Relevant costing

B. Product costing

C. Differential costing

D. Target costing

6.______________ can be measured as the income that could have been earned on an asset, based on the potential rate of return that is lost or sacrificed when one alternative use of the asset is chosen over another: 
 

A. Target cost

B. Sunk cost

C. Opportunity cost

D. Allocated cost

7._____________ costs between two alternative projects are those that would result from selecting one alternative instead of the other: 
 

A. Allocated

B. Differential

C. Sunk

D. Irrelevant

8.Which of the following cost classifications would not be considered relevant in comparing decision alternatives? 
 

A. opportunity cost.

B. differential cost.

C. sunk cost.

D. None of these.

9.In considering whether to accept a special order at a price less than the normal selling price of the product and where the additional sales will make use of present idle capacity, which of the following costs will not be relevant? 
 

A. Direct labor.

B. Direct materials.

C. Variable manufacturing overhead.

D. Fixed manufacturing overhead that cannot be avoided.

10.A cost classified "for decision-making purposes" would include: 
 

A. period cost.

B. opportunity cost.

C. controllable cost.

D. inventoriable cost.

16-1

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