35-38

38. ) Assume a manufacturing company is deciding whether to make or buy a component part. Which of the following indicates the need to include an opportunity cost when making the decision?

Multiple Choice

• If the company buys the part (instead of making it) it will expand the unused capacity within its plant.

• If the company buys the part (instead of making it) it can use newly available capacity to introduce and produce another profitable product.

• If the company buys the part (instead of making it) it will pay a price to the supplier that is less than the full manufacturing cost of the part.

• If the company buys the part (instead of making it) it will continue to pay the full salary of the plant manager.

Which of the following should be ignored when making decisions? Multiple Choice Sunk costs Differential costs O Avoidable costs Incremental costs Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be relevant to the decision? Multiple Choice The general administrative expenses allocated from corporate headquarters to this product line O The rent paid for the company's retail space, a portion of which is allocated to this product line The contribution margin earned by this product line O The store manager's salary Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be irrelevant to the decision? Multiple Choice 0 The product's sales The product's variable expenses The product's traceable fixed expenses The store manager's salary