Day 17

Question 1

What are the relevant costs in a decision analysis situation?

Answer 1

1. Incremental costs
2. Avoidable costs
3. Opportunity costs

Note: Historical costs are not relevant

MCQ-03552

Question 2

Define: Opportunity cost

Answer 2

Is the maximum benefit foregone by using a scarce resource for a given purpose. It is the benefit provided by the next best use of that resource.

MCQ-04249

Question 3

The opportunity cost of making a component when there is no alternative use for the factory is:

Answer 3

Zero

If there is excess capacity, then it is not possible to have Opportunity cost bc nothing is being foregone

MCQ-04251

Question 4

True or False: The use of resource markets outside of a company involves Opportunity costs.

Answer 4

True

MCQ-05255

Question 5

A company is choosing between project X and Y. The NPV of X is $1,000,000, the NPV of Y is $750,000. If the company chooses project X, what is the Opportunity cost?

Answer 5

$750,000

MCQ-04321

Question 6

When MGMT is deciding to accept or reject one time special orders when the plant is idle, what costs are relevant to this decision?

Answer 6

1. Direct costs
2. Variable costs
3. Incremental costs

Note: Absorption costs are not relevant*

MCQ-03280

Question 7

Relevant costs to a make-or-buy decision include:

Answer 7

1. Variable labor
2. Variable material
3. Avoidable fixed costs

MCQ-04271

Question 8

In Joint-Product costing and analysis, what costs are relevant when deciding the point a product should be sold to maximize profits?

Answer 8

Separable costs and revenues after the split off point

MCQ-04269