accounting II



1.) The method of evaluating financial data that change under
different courses of action is

a. financial statement analysis.

b. break-even analysis.

c. incremental analysis.

d. cost-benefit analysis.

2.) Brai. produces a product with
a $30 per-unit variable cost and an $80 per-unit sales price. Fixed
manufacturing overhead costs are $100,000. The firm has a one-time opportunity
to sell an additional 1,000 units at $60 each that would not affect its current
sales. Assuming the company has sufficient capacity to produce the additional
units, how would the acceptance of the special order affect net income?

a. income would decrease by $30,000.

b. income would increase by $30,000.

c. income would increase by $140,000.

d. income would increase by $40,000.

3.) Opportunity costs are:

a. included in inventory.

b. foregone benefits.

c. sunk costs.

d. included in cost of goods sold.

4.) A sunk cost is a cost that:

a. has been incurred and cannot be eliminated.

b. is never relevant in decision-making.

c. is never a differential cost.

d. all of these.

5.) _____________ is a cost management technique in which the
firm determines the required
cost for a product or service in order to earn a desired profit when the marketplace establishes the product’s
selling price:

a. relevant costing.

b. product costing.

c. differential costing.

d. target costing.

6.) ______________ can be measured as the income that could have
been earned on an asset, based on the
potential rate of return that is lost or sacrificed
when one alternative use of the asset is chosen over another:

a. target cost.

b. sunk cost.

c. opportunity cost.

d. allocated cost.

7.) _____________ costs between two alternative projects are
those that would result from
selecting one alternative instead of the other:

a. allocated.

b. differential.

c. sunk.

d. irrelevant.

8.) Which of the following cost classifications would not be
considered relevant in
comparing decision alternatives?

a. opportunity cost.

b. differential cost.

c. sunk cost.

d. none of these.

9.) In considering whether to accept a special order at a price
less than the normal selling price of
the product and where the additional sales will make use of present idle capacity, which of the following costs
will not be relevant?

a. direct labor.

b. direct materials.

c. variable manufacturing overhead.

d. fixed manufacturing overhead that cannot be

10.) A cost classified “for decision making purposes”
would include:

a. period cost.

b. opportunity cost.

c. controllable cost.

d. inventoriable cost.

11.) Relevant costs in decision-making:

a. are future costs that represent differences
between decision alternatives.

b. result from past decisions.

c. should not influence the decision.

d. none of these.

12.) If a cost is irrelevant to a decision, the cost could not be

a. fixed cost.

b. sunk cost.

c. differential cost.

d. variable cost.

13.) The potential rental value of space used in the manufacturing

a. is a variable production cost.

b. is an unavoidable production cost.

c. is a sunk production cost.

d. is an opportunity cost if production is not

14.) . Greenland Sports, Inc. has been asked to submit a bid to the
National Hockey League on supplying 1,000 pairs of professional quality skates.
The cost per pair of skates has been determined as follows:

Direct Materials $80

Direct Labor 60

Variable overhead 30

Fixed overhead (allocated) 20

Other non-manufacturing costs
associated with each pair of skates are:

Variable selling cost
(commission) $25

Fixed selling and
administrative cost 10

Assume the commission on the
sale of skates to the National Hockey League would be reduced to $15 per pair
and that available production capacity exists to produce the 1,000 pairs of
skates, the lowest price the firm can bid is some price greater than:

a. $185.

b. $190.

c. $215.

d. $225.

15.) The key to analyzing a sell as is or process further decision
is to determine that:

a. opportunity costs exceed sunk costs.

b. incremental revenues exceed incremental

c. differential costs do not exist.

d. all allocated costs are included in the

16.) In a make or buy decision which of the following costs would
be considered relevant?

a. avoidable costs.

b. unavoidable costs.

c. sunk costs.

d. allocated costs

17.) Which of the following qualitative factors favors the buy
option in the make or buy

a. production scheduling.

b. utilization of idle capacity.

c. ability to control quality.

d. technical expertise of supplier.

18.) Product Z sells for $18 per unit as is but if it is enhanced
it can be sold for $24 per
unit. The enhancement process will cost $50,000 for 10,000 units. If the 10,000 units of Product Z are sold as
is without further processing, the

a. will incur an incremental profit of

b. will incur an opportunity cost of $10,000.

c. will incur an incremental profit of $1 per

d. will incur an incremental loss of $6 per

19.) A(n) _____________ is the minimum cost that can be incurred,
which when subtracted from the
selling price, allows for a desired profit to be earned.

a. relevant cost.

b. opportunity cost.

c. incremental cost.

d. target cost.

20.) Product X sells for $80 per unit in the marketplace and ABC Company
requires a 35% minimum profit margin
on all product lines. In order to compete
in this market, the target cost for Product X must be equal to or lower than:

a. $28

b. $45

c. $52

d. $80

21.) Which of the following costs are not relevant in a decision to
continue or discontinue a segment of
the organization?

a. avoidable costs.

b. unavoidable costs.

c. opportunity costs.

d. differential costs.

22.) The decision to continue or discontinue a segment of the
business should focus on:

a. sales minus total variable expenses and
total fixed expenses.

b. sales minus total variable expenses and
avoidable fixed expenses of the segment.

c. sales minus total variable expenses and
allocated fixed expenses of the business.

d. none of these.

23.) The decision for solving production mix problems involving
multiple products and scarce production resources should focus on:

a. gross profit of each product.

b. sales price of each product.

c. contribution margin per unit of scarce

d. contribution margin of each product.

24.) XYZ Company produces three products: A, B, and C. Product A
has a contribution margin of $20 and requires 1 hour of machine time. Product B
has a contribution margin of $30 and requires 2 hours of machine time. Product
C has a contribution margin of $36 and requires 1.5 hours of machine time. If
machine hours are considered scarce, in what product mix order should XYZ
Company schedule the production of Products A, B, and C for the available
machine hours?

a. first A, then B, then C.

b. first C, then A, then B.

c. first C, then B, then A.

d. first B, then C, then A.

25.) A principal difference between operational budgeting and
capital budgeting is the time frame of the budget. Because of this difference,
capital budgeting:

a. is an activity that involves only the
financial staff.

b. is done on a rolling budget period basis.

c. focuses on the present value of cash flows
from investments.

d. is concerned with a long-term net income


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