11.Incremental costs should be considered in a make or buy decision.
12.If a company has the capacity to produce either 10,000 units of Product A or 10,000 units of Product B; assuming fixed costs are the same, production restrictions are the same for both products, and the markets for both products are unlimited; the company should commit 100% of its capacity to the product that has the higher contribution margin.
13.The decision to accept an additional volume of business should be based on a comparison of the revenue from the additional business with the sunk costs of producing that revenue.
14.Most financial measures of revenues and costs from accounting systems are based on historical costs.
15.Wages from a job a student gives up to attend summer school would be a sunk cost.
16.The cost of equipment purchased by a company last year would be an avoidable cost.
17.A special order of goods or services should always be accepted when the incremental revenue exceeds the normal revenue.
18.The decision to accept additional business should be based on a comparison of the incremental (differential) costs of the added production with the additional revenues to be received.
19.The total cost method determines a selling price equal to a product's total costs plus a desired profit on the product.
20.A markup percentage equals total costs divided by desired profit.