31. Which is an example of joint products?
A. Sugar and beef.
B. Pens and erasers.
C. Granulated coal and methyl alcohol.
D. Iron and plastic.
32. Which factor is not relevant in deciding whether or not to accept a special order?
A. Incremental revenue that will be earned.
B. Additional costs that will be incurred.
C. The effect that the order will have on the company's regular sales volume and selling prices.
D. The average cost of production if the special order is accepted.
33. In deciding whether or not to accept a special order, what is the opportunity cost of using machinery for which the firm has sufficient excess capacity to accept the order?
A. The historical cost of the machinery.
B. The undepreciated cost of the machinery.
C. The same machinery cost allocated to regular production orders.
D. Zero.
34. Incremental costs can be defined as:
A. Costs that are expected to increase regardless of the course of action chosen.
B. The differences between costs incurred under alternative courses of action.
C. Costs incurred in the past.
D. Costs that are irrelevant in decision making.
35. Accepting a special order is profitable whenever the revenue from the special order exceeds:
A. The average unit cost of production multiplied by the number of units in the order.
B. The incremental cost of producing the order.
C. The materials and direct labor costs of producing the order.
D. The fixed manufacturing costs for the period.
36. Which of the following would be an example of a sunk cost?
A. The cost of a new oil burner that replaced a destroyed one.
B. The cost of an old inefficient oil burner that will be replaced by a more modern and efficient one.
C. Depreciation expense.
D. Lost revenue from a bad debt.
37. Sunk costs:
A. Have already been incurred as a result of past actions.
B. Vary among the alternative courses of action being considered.
C. Are benefits that could have been obtained by following another course of action.
D. Result from unfavorable cost variances.
38. Mell Co. manufactured 100 personal computers at a cost of $30,000. It can sell them as is for $65,000, or install hard disks in them and sell them for $105,000. The $30,000 original manufacturing cost is:
A. An out-of-pocket cost because it has already been paid.
B. A sunk cost because it is not relevant to the decision.
C. An incremental cost because it is relevant to the decision.
D. A fixed cost because it will remain the same no matter which action is taken.
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000.
39. Refer to the information above. In deciding whether to rework the tables or sell them as is, management should:
A. Compare the $305,000 proceeds from the sale of the tables as is, with the $355,000 cost of the tables.
B. Compare the $605,000 possible revenue from refinished tables with the total cost of $355,000 plus $315,000 to refinish.
C. Compare the $315,000 cost to refinish the tables with the incremental revenue of $300,000 if the tables are refinished.
D. Eliminate any alternative that results in a loss on the sale of the product.
40. Refer to the information above. Which of the following is not relevant to management's decision regarding refinishing the tables or selling them as is?
A. The additional $300,000 revenue that can be generated if the tables are refinished.
B. The $355,000 manufacturing cost of the tables already incurred.
C. The additional $315,000 cost to refinish the tables.
D. The effect of selling "seconds" on Fancy's reputation as a fine-furniture manufacturer.