When constrained by a limiting resource, managers often seek to produce those products which have:
Question options:
| | | a) | The highest selling prices. | |
| | | b) | The lowest average cost per unit. | |
| | | c) | The highest contribution margin ratios. | |
| | | d) | The highest contribution margin per unit of limiting resource. | |
| Question 3 | | | |
Opportunity costs represent:
Question options:
| | | a) | Costs avoided by making a particular decision. | |
| | |
| | | c) | Costs avoided by making a particular decision. | |
| | | d) | Cash expenditures for business opportunities. | |
| Question 4 | | 0 / 1 point | |
When deciding whether to make or buy a component part, the most relevant consideration is often:
Question options:
| | | a) | The sunk cost of equipment used to manufacture the part. | |
| | | b) | The unavoidable fixed manufacturing costs. | |
| | | c) | The average total cost of making the part. | |
| | | d) | The variable manufacturing costs per unit. | |
Which of the following would be least relevant in deciding whether to further process a joint product past the split-off point?
Question options:
| | | a) | Customer demand for the product that emerges from additional processing. | |
| | | b) | Joint costs allocated to the joint product at the split-off point. | |
| | | c) | Incremental revenue earned from additional processing. | |
| | | d) | Incremental costs incurred as a result of additional processing. | |
| Question 6 | | 0 / 1 point | |
The average total cost of producing Z-12 is $35 per unit. The average variable cost associated with the production of Z-12 is $12 per unit, of which $2 is manufacturing overhead. The normal selling price of Z-12 is $50 per unit. If excess capacity exists, a special order for Z-12 will increase net operating income if it is priced at least:
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ILF makes 2,000 waterproof mattresses annually to be used in one of its products. The unit cost of the mattresses includes variable costs of $45 and fixed costs of $30. If the mattresses were purchased from an outside supplier, 60% of the fixed costs could be eliminated. Buying mattresses from an outside supplier at a price of $50 each would cause ILFs operating income to:
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The decision to rework a defective branch of products will improve net income whenever the incremental revenue earned as a result of the decision exceeds:
Question options:
| | | a) | The average cost per unit associated with reworking the batch. | |
| | | b) | The cash expenditure to rework the batch. | |
| | | c) | The variable costs of reworking the batch. | |
| | | d) | The incremental cost of reworking the batch. | |
| Question 9 | | 0 / 1 point | |
Johnson produces 7,000 skateboards each month, which it sells for $60 each. Variable costs are $25 per unit, and fixed costs are $95,000 per month. A Canadian company has offered to buy an additional 1,000 skateboards for $30 per unit. Assuming that normal sales volume and fixed costs remain unchanged, filling this special order will cause Johnsons operating income to:
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Which of the following costs is generally considered irrelevant in incremental analysis?
Question options:
