31. Which of the following statements is true when making a decision between two alternatives?

A)Fixed costs are never relevant

B)Taxes are never relevant

C)Variable costs may not be relevant when the decision alternatives have the same activity levels

D)Variable costs are not relevant when the decision alternatives have different activity levels

32. The Northern Ring Company manufactures 2,000 telephones per year.The full manufacturing costs per telephone are as follows:

Direct materials

$2

Direct labor

8

Variable manufacturing overhead

6

Average fixed manufacturing overhead

6

Total

$22

The Texas Ring Company has offered to sell Northern Ring Company 2,000 telephones for $15 per unit.If Northern Ring Company accepts the offer, $10,000 of fixed overhead will be eliminated.

Northern Ring should:

A)Make the telephones; the savings is $2,000

B)Buy the telephones; the savings is $24,000

C)Buy the telephones; the savings is $12,000

D)Make the telephones; the savings is $12,000

33. The Rug Weaving Company manufactures an intermediate product identified as Y3.Variable manufacturing costs per unit of Y3 are as follows:

Direct materials

$ 2

Direct labor

$7

Variable manufacturing overhead

$5

Purple Company has offered to sell Rug Weaving 5,000 units of Y3 for $20 per unit.If Rug Weaving accepts the offer, $25,000 of fixed manufacturing overhead will be eliminated.

Applying differential analysis to the situation, Rug Weaving should:

A)Buy Y3; the savings is $50,000

B)Buy Y3; the savings is $5,000

C)Make Y3; the savings is $50,000

D)Make Y3; the savings is $5,000

34. If a trucking company were operating at capacity, but had an opportunity to fill a one-time high volume special order, which of the following ramifications could occur?

A)Lost revenues from regular customers

B)Long-term revenue loss from customers who change service to competitors

C)Questions from regular customers about commitment to service

D)All of the above

35. A company loses revenues from regular customers by accepting a special order when operating at capacity.The loss of revenue just described is an example of which of the following?

A)A revenue cost

B)A sunk cost

C)An opportunity cost

D)An unavoidable cost