Module 16 Flashcards by Marc Hill

T/F: Relevant costs are future costs that differ between competing decision alternatives

True

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T/F: Outlay costs are costs that have been incurred in the past, such as the purchase of a new piece of equipment for an outlay cost of $4,000

False

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T/F: All outlay costs are relevant

False

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T/F: Sunk costs are the result of past decisions; therefore, they are always relevant to future decisions

False

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An opportunity cost is the net cash inflow that could be obtained if the resources committed to one action were used in the most desirable other alternative.

True

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T/F: Opportunity costs are usually relevant in relevant cost analysis, but not always.

False

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Relevant costs are best described as:
A. Future costs 
B. Future costs that differ between competing decision alternatives
C. Opportunity costs
D. Out-of-pocket costs

Future costs that differ between competing decision alternatives

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If a cost is identical under each alternative under consideration within a given decision context, the cost is considered:
A. A sunk cost
B. An opportunity cost
C. An outlay cost
D. An irrelevant cost

An irrelevant cost

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\_\_\_\_\_\_\_\_\_\_\_ are costs that require future expenditures of cash or other resources:
A. Accounts Payable
B. Committed costs
C. Opportunity costs
D. Outlay costs

Opportunity costs

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An outlay cost is not relevant if it:
. Does not differ under the decision alternatives at hand
B. Is under $10,000 or if it is less than 2% of sales.
C. Not an opportunity cost
D. Sunk

Does not differ under the decision alternatives at hand

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Which of the following statements about sunk costs is true?
A. Sunk costs are the result of past decisions
B. Sunk costs are never relevant to decisions (except for tax considerations)
C. Sunk costs do not vary between decision alternatives
D. All

All of the Above

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The external acquisition of services or components is called:
A. Avoidable costing
B. Conversion
C. Outsourcing
D. Networking

Outsourcing

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The Titanic hit an iceberg and sank.  In deciding whether or not to salvage the ship, its book value is a(n):
Relevant cost
B. Sunk cost
C. Opportunity cost
D. Discretionary cost

Sunk cost

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Future costs that differ among competing alternatives are:
A. Absorption costs
B. Relevant costs
C. Replacement costs
D. Variable overhead costs

Relevant costs

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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.

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

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T/F: Differential analysis is an approach to the analysis of relevant costs that focuses on the costs that differ under alternative actions

True

T/F: In deciding whether to sell a joint product or to process it further, any costs incurred prior to the split-off point are sunk costs and are, therefore, irrelevant costs

True

T/F: Joint Costs are costs associated with joint products that are incurred subsequent to the split-off point.

False

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

All of the Above

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

An opportunity cost

A(n) \_\_\_\_\_\_\_\_\_\_\_\_ cost is the net cash inflow that could be obtained if the resources committed to one action were used in the most desirable other alternative.
A. Avoidable
B. Contribution margin
C. Outlay
D. Opportunity

Opportunity

Organizations may manufacture products or provide services they can obtain at lower costs elsewhere in order to:
A. Control quality
B. Have an assured source of supply
C. Maintain a core competency
D. All of the above

All of the Above

Joint products are:
A. Any set of products that can use the same resources
B. Products that create production bottlenecks
C. Products that increase in value if sold as a package
D. Two or more products simultaneously produced from a common set of inputs by a single process

Two or more products simultaneously produced from a common set of inputs by a single process

The point in the production process where joint products become separately identifiable is called:
A. The conversion point
B. The point of sale
C. The split-off point
D. The throughput point

The split-off point

``` In deciding whether to sell a joint product or to process it further, any costs incurred prior to the split-off point should be: A. Allocated by size of the product B. Allocated by weight of the product C. Considered as a sunk cost D. Subtracted from joint revenues ```

Considered as a sunk cost

In deciding whether to sell a joint product or to process it further, management should consider: A. All joint costs and separately identifiable costs B. Only joint costs that vary with production volume C. The separately identifiable costs of the product under consideration D. Variable joint and variable separately available costs

The separately identifiable costs of the product under consideration

Firms are more likely to accept a special order for one of their products at a reduced price if: A. All costs are variable B. Excess capacity exists C. The order is small D. The buyer plans to compete in the markets of the firm's regular customers

Excess capacity exists

Joint costs are: A. Costs incurred prior to the split-off point when producing products that appear simultaneously B. Most often found in companies that further process the final output of other manufacturing firms C. Relevant to decisions to sell joint products or to process them further D. Separately identifiable at the split-off point

Costs incurred prior to the split-off point when producing products that appear simultaneously

``` _______________ are the net cash inflows that could be obtained if the resources committed to one action were used in the most desirable other alternative. A. Gross profits B. Outlay costs C. Opportunity costs D. Net contributions ```

Opportunity costs

``` The external acquisition of services or components is called: A. Downsizing B. Outsourcing C. Profit maximization D. Total cost analysis ```

Outsourcing

T/F: The theory of constraints states that every process has a bottleneck and production cannot take place faster than it is processed through the bottleneck.

True

In an effort to achieve short-run profit maximization, limited resources should first be allocated to the product with: A. The highest contribution margin per unit B. The highest contribution per unit of constraining factor C. The highest selling price per unit of constraining factor D. The lowest cost per unit of constraining factor

The highest contribution per unit of constraining factor

``` This theory states: “Every process has a bottleneck and production cannot take place faster than it is processed through the bottleneck.” A. Eaves Theory of Manufacturing B. Porter’s Four Forces C. The Theory of Integrated Workflow D. The Theory of Constraints ```

The Theory of Constraints

``` Sales revenue minus the costs of direct materials is known as: A. Conversion costs B. Contribution margin C. Outlay costs D. Throughput ```

Throughput

According to the Theory of Constraints management should not: A. Discourage buildup of excess inventory B. Encourage factory throughput C. Encourage the full utilization of non-bottleneck resources D. Measure utilization of the bottleneck

Encourage the full utilization of non-bottleneck resources

``` The goal of the Theory of Constraints is to maximize: A. Bottlenecks B. Product level activity C. Revenues D. Throughput ```

Throughput

``` Elvira Corporation sells 2,000 units of product Y per day at $2.00 per unit. Elvira has the option of processing the product further for additional costs of $1,000 per day to produce product Z, which sells for $2.80 per unit. If Elvira processes product Y further to produce product Z, the company's net income will: A. Decrease by $600 per day B. Decrease by $1,000 per day C. Increase by $600 per day D. Increase by $1,600 per day ```

C. Increase by $600 per day