1. In a make or buy decision, opportunity cost is defined as

a.the increase in cost that the company incurs from an alternative course of action.

b.the decrease in cost that the company incurs from an alternative course of action.

c.the potential benefit that a company may lose by following an alternative course of action.

d.all of the above.

2. Bramble Division has the following data:

Sales	$ 502000
Variable costs	237000
Fixed costs	273000

The fixed costs are not avoidable and must be allocated to profitable divisions if the segment is eliminated. What will be the incremental effect on net income if Bramble Division is eliminated?

a.$ 59250 increase

b.$ 265000 decrease

c.$ 273000 decrease

d.Cannot be determined from the data provided

3. Oriole Makeup produces face cream. Each bottle of face cream costs $ 9 to produce and can be sold for $ 14. The bottles can be sold as is, or processed further into sunscreen at a cost of $ 15 each. Oriole Makeup could sell the sunscreen bottles for $ 23 each. What should Oriole Makeup do?

a.Face cream must not be further processed because it decreases operating income by $ 1 each.

b.Face cream must not be further processed because incremental revenue is less than incremental processing costs.

c.Face cream must be further processed because its operating income is $ 8 each.

d.Face cream must be further processed because it increases operating income by $ 5 each.

4. A company has a process that results in 1130 kilograms of Product X that can be sold for $ 8 per kilogram. An alternative would be to process Product X further at a cost of $ 2260 and then sell it for $ 15 per kilogram. Should management sell Product X now or should Product X be processed further and then sold?

a.Process further; the company will be better off by $ 5650.

b.Process further; the company will be better off by $ 7910.

c.Sell now; the company will be better off by $ 5650.

d.Sell now; the company will be better off by $ 9040.