1. In the decision related to whether a product should be eliminated or not, only the variable costs identified with the product are relevant in such a decision.

true

false

2. When the carrying costs are reduced, the economic order quantity will increase.

true

false

3. If we assume that inventory is used up at a constant rate, and the safety stock is zero, the average inventory will be 1/2 the order size.

true

false

4. If the sales mix changes, the average contribution margin ratio is likely to change as well.

true

false

5. A cost that will be incurred regardless of which course of action a manager takes is relevant to the manager's decision.

true

false

6. In deciding whether to make a part internally or buy it from an outside supplier, the purchase price of the part is considered as a relevant cost.

true

false

7. Which of the following is not a valid quantitative measure for accounts receivable collection policies? *

a-Ratio of debt to equity.

b-Average collection period.

c-Aging of accounts receivable.

d-Ratio of bad debts to credit sales.

e-None of the above.

8. To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following? *

a-Fixed expenses per unit.

b-Variable expenses per unit.

c-Variable expenses per unit / Selling price per unit.

d-(Selling price per unit - Variable expenses per unit) / Selling price per unit.

e-None of the above.

9. For which of the following decisions are sunk costs relevant? *

a-The decision to accept or reject a special-order offer.

b-The decision to keep an old machine or buy a new one.

c-The decision to drop or keep a segment.

d-All of the above.

e-None of the above.

10. A company is considering a decision of either accepting or rejecting a special offer for one of its products. A cost that is not relevant is: *

a-Direct materials.

b-Variable overhead.

c-Fixed overhead that will be avoided if the special offer is accepted.

d-Common fixed overhead that will continue if the special offer is not accepted.

e-None of the above.