QUIZ 1 (SHORT TERM DECISION MAKING)

Which of the following is NOT TRUE about relevant cost?

• Relevant cost is avoidable costs.

• Relevant costs is future costs.

• Relevant costs is sunk costs.

• The relevant cost concept is useful for eliminating extraneous information from a particular decision-making process.

A building contractor has carried out a survey with a cost of RM5,000 so that he can put in a bid to build a new factory. He has paid RM3,000 so far. Which survey costs are relevant to his bid?

• RM2,000 still to pay

• RM5,000 total survey cost

• None

• RM3,000 already paid

A supermarket is considering running a promotion on one of its washing powder brands. By doing this, it will not be able to run a campaign on its shampoo brands, which would have generated a contribution of RM50,000. What type of cost is this RM50,000?

• Marginal

• Direct

• Indirect

• Opportunity

To complete an order for making curtains, Rosa will need to employ three seamstresses for two days at rm30 per day. It will also take five hours of her time, which she costs out at rm10 per hour. She will receive rm500 and have to buy materials of rm220. If she accepts this order, she will have to turn down another order, which would have generated a contribution of $80. How much contribution will she make?

• RM100

• RM30

• NONE

• RM60

A clothing company produces wool jumpers. If wool is limited, in what order should these jumpers be produced to maximize the company's profits?

• Man, woman, child

• Woman, child, man

• Child, woman, man

• Woman, man, child

The decision-making process requires......

• analysis of the most recent income statement of the business

• a disregard of non-relevant costs

• a disregard of forecasts

• the use of large amounts of historical data

An opportunity cost is the cost of.......

• unplanned new business

• lost business

• lost business obtaining new business opportunities

• the next best alternative course of action

Which of the following costs is not relevant when considering the closure of a department within a factory?

• direct labour

• direct materials

• fixed overheads

• variable overheads

In a make versus buy decision which of the following factors is not relevant?

• reliability of supplier

• reliability of bought-in products

• fixed production costs

• opportunity cost of alternative activities

When deciding to accept a special order at below the normal selling price a firm would consider which cost?

• Full cost

• Marginal cost

• Overhead cost

• Absorption cost