ACYMAG1 Unit 3

In a decision-making case, which of the following costs is generally NOT relevant to the decision?

• Avoidable cost

• Historical cost

• Opportunity cost

• Differential cost

In a decision-making case, which of the following costs is not likely to contain a relevant cost component?

• Labor cost

• Selling cost

• Depreciation cost of an existing asset

• Factory overhead cost

The term relevant cost applies to all of the following decision situations except the:

• Acceptance of special product order

• Manufacture or purchase of a component part

• Determination of product price

• Replacement of equipment

Management accountants are concerned with incremental unit costs. These costs are similar to the following except:

• The economic marginal cost

• The variable cost

• The cost to produce an additional unit

• The manufacturing unit cost

The distinction between avoidable and unavoidable costs is similar to the distinction between

• Discretionary costs and committed costs

• variable costs and fixed costs

• variable costs and mixed costs

• step-variable costs and fixed costs

Assume a company produces three products: A, B, and C. It can only sell up to 3,000 units of each product. Production capacity is unlimited. The company should produce the product (or products) that has (have) the highest

• contribution margin per hour of machine time

• gross margin per unit

• contribution margin per unit

• sales price per unit

When there is a scarce resource, the product that should be produced first is the product with

• the highest contribution margin per unit of the scarce resource

• the highest sales price per unit of scarce resource

• the highest demand

• the highest contribution margin per unit

In a make or buy decision, the opportunity cost of capacity could

• be considered to decrease the price of units purchased from suppliers

• be considered to decrease the cost of units manufactured by the company

• be considered to increase the price of units purchased from suppliers

• not be considered since opportunity costs are not part of the accounting records

If the firm is at full capacity, the minimum special order price must cover

• variable cost associated with the special order

• variable and fixed manufacturing costs associated with the special order

• variable and incremental fixed costs associated with the special order

• variable and incremental fixed costs associated with the special order plus foregone contribution margin on regular units not produced

There is a market for both product X and product Y. Which of the following costs and revenues would be most relevant in deciding whether to sell product X or process it further to make product Y?

• Total cost of making X and the revenue from sale of X and Y

• Total cost of making Y and the revenue from sale of Y

• Additional cost of making Y, given the cost of making X, and additional revenue from Y

• Additional cost of making X, given the cost of making Y, and additional revenue from Y