Question 1

At split-off,the joint costs of production for joint products are not relevant to the sell-or-process-further decision.

Accepted Answer

At split-off, joint costs have already incurred and cannot be changed by the sell-or-process-further decision. Therefore, they are considered sunk costs and are not relevant to the decision. Only the additional costs and potential revenue from processing further are considered relevant.

Question 2

A sunk cost isalways relevant.

Accepted Answer

A sunk cost is a cost that has already been incurred and cannot be recovered. It should not be considered in decision-making because it is irrelevant to future costs and benefits.

Question 3

Future costs that differ across alternatives are relevant costs.

Accepted Answer

Future costs that differ across alternatives are relevant to the decision-making process because they provide valuable information about the potential outcomes of each alternative. These costs can include expenses such as labor costs, material costs, and overhead costs, among others. By considering these relevant costs, decision-makers can make better-informed decisions and choose the alternative that is most likely to result in the desired outcome.

Question 4

Flexible resources may have unused capacity.

Accepted Answer

The answer of Flexible resources may have unused capacity....

Question 5

In keep-or-drop decisions,both the segment's contribution margin and its segment margin are useful in evaluating the performance of the segment.

Accepted Answer

Both the contribution margin and segment margin provide important information in determining the profitability of a segment and whether it should be kept or dropped. The contribution margin shows the amount of revenue left over after deducting variable expenses, while the segment margin takes into account both variable and fixed expenses allocated to the segment.

Question 6

Irrelevant costs are costs that are the same for more than one alternative.

Accepted Answer

Irrelevant costs are costs that do not differ between alternatives, making them the same for more than one option.

Question 7

The benefit sacrificed when one alternative is chosen over another is called sunk cost.

Accepted Answer

Sunk cost refers to a cost that has already been incurred and cannot be recovered, regardless of the decision made. The benefit sacrificed when one alternative is chosen over another is known as opportunity cost.

Question 8

Bellair Company produces a product that has manufacturing cost of $30 per unit.Bellair's policy is to charge a price equal to cost plus 30%.The 30% is pure profit to Bellair.

Accepted Answer

The policy is to charge cost plus 30%, which means the selling price would be $30 + 30% of $30 = $39 per unit. The 30% is not pure profit as it includes the cost of production.

Question 9

In making a short-run decision,all alternatives need to be considered.

Accepted Answer

In making a short-run decision, all alternatives need not be considered.Only feasible alternatives are considered.

Question 10

Short-run decision making only involves short-run decisions that have nothing to do with the firm's overall strategy.

Accepted Answer

Short-run decision making still must align with the firm's overall strategy, as these decisions can impact long-term goals and objectives.

Question 11

A segment margin is always greater than or equal to zero.

Accepted Answer

A segment margin can be negative if the costs associated with the segment are higher than the revenue generated by the segment.

Question 12

A situation in which management tells divisions that they must reduce costs by 10% is called target costing.

Accepted Answer

Target costing is a cost management technique in which a target cost is set for a product and the design and production processes are adjusted to meet that target cost. It is not the same as management simply telling divisions to reduce costs by a certain percentage.

Question 13

In deciding the optimal mix of products that use a constrained resource,it is important to determine the contribution margin per unit of scarce resource.

Accepted Answer

Determining the contribution margin per unit of scarce resource helps in identifying the most profitable products and making informed decisions about product mix and resource allocation.

Question 14

In short-run decision making,the alternative with the lowest overall cost is always chosen.

Accepted Answer

In short-run decision making, the alternative with the lowest total cost, not overall cost, is chosen. Total cost includes both variable and fixed costs, whereas overall cost may include other factors such as quality and reputation that cannot be easily quantified.

Question 15

Typically in a special-order decision,a customer wants to pay more than the usual price.

Accepted Answer

Typically in a special-order decision, a customer wants to pay less than the usual price.

Question 16

The first step in making a short-run decision is to identify alternatives as possible solutions to the problem.

Accepted Answer

The first step in making a short-run decision is to define the problem.

Question 17

A choice between internal and external production is a keep-or-drop decision.

Accepted Answer

A choice between internal and external production is a make-or-buy decision.

Question 18

Linear programming is a special technique that can be used to determine the optimal product mix when there are multiple constraints.

Accepted Answer

Linear programming is a mathematical technique that can be used to determine the optimal solution for a given problem subject to multiple constraints. It is commonly used in business and economics to determine the best way to allocate resources and maximize profit or minimize cost.

Question 19

Resources that are acquired in advance of usage are flexible resources.

Accepted Answer

Resources acquired in advance of usage are considered committed resources, not necessarily flexible resources, as they are often specific in nature and tied to a particular use or period.

Question 20

Fixed costs are never relevant.

Accepted Answer

Fixed costs can be relevant in certain situations, such as when making decisions about long-term investments or when determining the breakeven point for a business.

Quiz 13: Short-Run Decision Making: Relevant Costing