ACC560/ MCQs
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accounting_mcqs.docxWeek 6 - Chapter 7 Pre- Quiz Study 15 QUESTIONS
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Question 1 |
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Which of the following stages of the management decision-making process is improperly sequenced?
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Evaluate possible courses of action → Make decision. |
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Assign responsibility for the decision → Identify the problem. |
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Identify the problem → Determine possible courses of action. |
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Assign responsibility for decision → Determine possible courses of action. |
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Question 2 |
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A segment has the following data:
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Sales |
$700,000 |
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Variable expenses |
300,000 |
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Fixed expenses |
550,000 |
What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?
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$400,000 decrease |
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cannot be determined from the data provided |
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$5,000 decrease |
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$400,000 increase |
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Question 3 |
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New Age Makeup produces face cream. Each bottle of face cream costs $10 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. New Age Makeup could sell the sunscreen bottles for $23 each.
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Face cream must be processed further because its profit is $9 each. |
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Face cream must not be processed further because costs increase more than revenue. |
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Face cream must not be processed further because it decreases profit by $1 each. |
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Face cream must be processed further because it increases profit by $3 each. |
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Question 4 |
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A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?
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The book value of the old equipment |
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Depreciation expense of the old equipment |
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The current disposal price of the old equipment |
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The loss on disposal of the old equipment |
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Question 5 |
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Incremental analysis would not be appropriate for:
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analysis of manufacturing variances. |
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elimination of an unprofitable segment. |
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an allocation of limited resource decision. |
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a make or buy decision. |
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Question 6 |
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Sandusky Inc. has the following costs when producing 100,000 units:
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Variable costs |
$600,000 |
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Fixed costs |
900,000 |
An outside supplier is interested in producing the item for Sandusky. If the item is produced outside, Sandusky could use the released production facilities to make another item that would generate $150,000 of net income. At what unit price would Sandusky accept the outside supplier’s offer if Sandusky wanted to increase net income by $120,000?
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$5.70 |
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$6.30 |
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$8.70 |
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$7.50 |
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Question 7 |
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Book value of old equipment is considered to be a
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cost that can be changed by a present or future decision. |
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sunk cost. |
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relevant cost. |
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semi-relevant cost. |
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Question 8 |
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Paul Bunyon Lumber Co. produces several products that can be sold at the split-off point or processed further and then sold. The following results are from a recent period:
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Sales Value |
Additional |
Sales Value After |
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Product |
at Split-off |
Variable Costs |
Further Processing |
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Green lumber |
$159,600 |
$24,000 |
$178,000 |
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Rough lumber |
124,000 |
28,200 |
173,600 |
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Sawdust |
102,000 |
19,600 |
130,000 |
What is the increase in profit if the appropriate products are processed further?
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$29,800 |
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$24,200 |
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$96,000 |
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$255,800 |
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Question 9 |
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All of the following are relevant to the sell or process further decision except:
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revenues at the split-off point. |
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costs incurred before the split-off point. |
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revenues beyond the split-off point. |
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costs incurred beyond the split-off point. |
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Question 10 |
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A company is considering replacing old equipment with new equipment. Which of the following is a relevant cost for incremental analysis?
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Cost of the new equipment |
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Annual depreciation charge on the old equipment |
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Book value of the old equipment |
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Estimated annual depreciation of the new equipment |
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Question 11 |
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A company is contemplating the acceptance of a special order. The order would not affect regular sales and could be filled without exceeding plant capacity. However, a new stamping machine would have to be purchased in order to stamp the customer’s name on the product. Which of the following is likely?
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Only variable costs will be relevant. |
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Both variable and fixed costs will be relevant. |
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Only fixed costs will be relevant. |
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Total variable costs will be irrelevant. |
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Question 12 |
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A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis?
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Book value of the old equipment |
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Annual operating cost of the new equipment |
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Annual operating cost of the old equipment |
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Net cost of the new equipment |
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Question 13 |
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In the analysis concerning the acceptance or rejection of a special order, which items are relevant?
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Variable costs only |
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Fixed costs only |
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Variable costs and fixed costs |
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Variable costs and unavoidable costs |
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Question 14 |
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In incremental analysis:
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only costs are analyzed. |
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both costs and revenues may be analyzed. |
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only revenues are analyzed. |
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both costs and revenues that stay the same between alternate courses of action will be analyzed. |
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Question 15 |
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If a company anticipates that other sales will be affected by the acceptance of a special order, then:
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lost sales should not be considered in the incremental analysis. |
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lost sales should be considered in the incremental analysis. |
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the order should not be accepted. |
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the order will only be accepted if the plant is below capacity. |
