Knowledge Check 01 Which of the following factors should be considered when deciding whether to keep a product line or drop it? (Select all that apply) Check All That Apply 0 Opportunity costs of using the production facility currently being used for the product line 0 Revenues generated by the product line 0 Variable costs incurred in manufacturing the product 0 Direct fixed costs associated with the product line 0 Common fixed costs allocated to the product line Check All That Apply o Opportunity costs of using the production facility currently being used for the product line o Revenues generated by the product line o Variable costs incurred in manufacturing the product o Direct fixed costs associated with the product line o Common fixed costs allocated to the product line o Research and development costs spent on designing the product line Knowledge Check 01 A sell-or-process further decision involves deciding whether to: Accept a special order for a price lower than normal Continue a product line or eliminate it Sell a product as is or continue to refine it O Produce a product in-house or outsource it Knowledge Check 02 Potomac Backpacks, Inc. manufactures regular backpacks. The company is considering processing these backpacks further to produce hiking backpacks. A summary of the expected costs and revenues for both of these options follows: Ordinary Backpacks $ 50 Hiking Backpacks $ 75 Activity Estimated sales price Estimated manufacturing cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost $ 15 10 $ 20 15 10 $ 35 $ 50 $8,000 If the company can sell 8,000 units of either product, what is the expected incremental profit or loss from processing the backpacks further? $72,000 $65,000 ($15,000) $20,000 Knowledge Check 03 Which of the following should be ignored when deciding whether to sell a product as is or process it further? The cost incurred in producing the product so far The cost of processing products further The revenue from processing products further The opportunity cost of resources needed to process products further Knowledge Check 04 Which of the following is the decision rule of a sell-or-process-further decision? O A product should be processed further if the incremental revenue from processing it further exceeds the incremental cost O A product should be processed further if the total revenue from processing it further exceeds the total manufacturing cost O A product should be processed further if there is an increase in revenue from processing it further O A product should be processed further if the total cost of processing it further exceeds the incremental revenue