estion 1.Relevant costs are often referred to as: (Points : 2)

29 Jun estion 1.Relevant costs are often referred to as: (Points : 2)

Question
1.Relevant costs are often referred to as: (Points : 2)

unavoidable costs.
avoidable costs.
sunk costs.
reversible costs.

Question 2. 2.Centennial Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below:

Tour A

Tour B

Projected revenue

$7,000

$11,000

Variable costs

1,000

6,000

Fixed costs

3,000

3,000

Profit

$3,000

$1,000

What are the incremental (differential) costs of Tour B? (Points : 2)

$2,000
$3,000
$4,000
$5,000

Question 3. 3.Emily paid $2 for a bottle of ThirstAid. Later while on a hiking trip, she was offered $10 for the ThirstAid. Select the correct statement from the following. (Points : 2)

The $2 original purchase price is a sunk cost.
If Emily drinks the ThirstAid, no opportunity cost is associated with her decision.
The $10 offer is not relevant if Emily refuses to sell the ThirstAid.
All of the above are correct.

Question 4. 4.For purposes of decision making, avoidable costs are costs that: (Points : 2)

were incurred in the past.
will be incurred in the future and differ between the alternatives.
do not differ between alternatives.
are not relevant in decision making.

Question 5. 5.Dalton Company is trying to decide between the following two alternatives:

Alternative A

Alternative B

Projected revenue

$50,000

$60,000

Direct material

6,000

12,000

Assembly labor

9,000

9,000

Production supervisor’s salary

10,000

10,000

Facility-related costs

10,000

15,000

Profit

$15,000

$14,000

Which of the following conclusions can be drawn from this example? (Points : 2)

Variable costs are always relevant for decision making.
Fixed costs are sunk and thus are never relevant for decision making.
Relevant costs may include variable costs and fixed costs.
The amount of revenue is not relevant to this decision.

Question 6. 6.Alicia brought her lunch today but now a coworker has asked her to go to the deli across the street. Select the correct statement from the following. (Points : 2)

The cost of the lunch Alicia already has is relevant to Alicia’s decision to have lunch with her friend.
The cost of the lunch Alicia already has represents the opportunity cost of dining with her friend.
The cost to buy lunch at the deli is not relevant because it has not yet been incurred.
The cost of the lunch that Alicia brought has nothing to do with her current decision because it is a sunk cost.

Question 7. 7.Select the correct statement regarding relevant costs and revenues. (Points : 2)

Relevant costs are also known as avoidable costs.
Relevant costs are future-oriented.
Relevant revenues must differ between the alternatives.
All of the above are correct.

Question 8. 8.Frank is trying to decide which one of two job offers he will accept. Several items are presented below:

Job Criterion

Job Offer A

Job Offer B

(1) Base salary

$40,000

$40,000

(2) Overtime compensation

Comp. time

Hourly rate

(3) Moving allowance

$ 2,000

$ 2,000

(4) Signing bonus

$ 1,000

$ 0

(5) Job search costs

$ 500

$ 500