16. The key to analyzing a sell as is or process further decision is to determine that:

16. The key to analyzing a sell as is or process further decision is to determine that:

A. opportunity costs exceed sunk costs.

B. incremental revenues exceed incremental costs.

C. differential costs do not exist.

D. all allocated costs are included in the decision.

17. In a make or buy decision which of the following costs would be considered relevant?

A. Avoidable costs.

B. Unavoidable costs.

C. Sunk costs.

D. Allocated costs.

18. Which of the following qualitative factors favors the buy option in the make or buy decision?

A. Production scheduling.

B. Utilization of idle capacity.

C. Ability to control quality.

D. Technical expertise of supplier.

19. Product Z sells for $18 per unit as is but if it is enhanced it can be sold for $24 per unit. The enhancement process will cost $50,000 for 10,000 units. If the 10,000 units of Product Z are sold as is without further processing, the company:

A. will incur an incremental profit of $10,000.

B. will incur an opportunity cost of $10,000.

C. will incur an incremental profit of $1 per unit.

D. will incur an incremental loss of $6 per unit.

20. A(n) _____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned.

A. relevant cost.

B. opportunity cost.

C. incremental cost.

D. target cost.

21. Product X sells for $80 per unit in the marketplace and ABC Company requires a 35% minimum profit margin on all product lines. In order to compete in this market, the target cost for Product X must be equal to or lower than:

A. $28

B. $45

C. $52

D. $80

22. Which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization?

A. Avoidable costs.

B. Unavoidable costs.

C. Opportunity costs.

D. Differential costs.

23. The decision to continue or discontinue a segment of the business should focus on:

A. sales minus total variable expenses and total fixed expenses.

B. sales minus total variable expenses and avoidable fixed expenses of the segment.

C. sales minus total variable expenses and allocated fixed expenses of the business.

D. none of the above.

24. The decision for solving production mix problems involving multiple products and scarce production resources should focus on:

A. gross profit of each product.

B. sales price of each product.

C. contribution margin per unit of scarce resource.

D. contribution margin of each product.

25. XYZ Company produces three products: A, B, and C. Product A has a contribution margin of $20 and requires 1 hour of machine time. Product B has a contribution margin of $30 and requires 2 hours of machine time. Product C has a contribution margin of $36 and requires 1.5 hours of machine time. If machine hours are considered scarce, in what product mix order should XYZ Company schedule the production of Products A, B, and C for the available machine hours?

A. First A, then B, then C.

B. First C, then A, then B.

C. First C, then B, then A.

D. First B, then C, then A.

26. A principal difference between operational budgeting and capital budgeting is the time frame of the budget. Because of this difference, capital budgeting:

A. is an activity that involves only the financial staff.

B. is done on a rolling budget period basis.

C. focuses on the present value of cash flows from investments.

D. is concerned with a long-term net income forecast.

27. Capital budgeting differs from operational budgeting because:

A. depreciation calculations are required.

B. it considers the time value of money.

C. operating expenses are not relevant.

D. capital budgets don’t affect cash flow.

28. Capital expenditure analysis, which leads to the capital budget, attempts to determine the impact of a proposed capital expenditure on the organization’s:

A. segment margin.

B. contribution margin.

C. ROI.

D. cost of capital.

29. The cost of capital used in the capital budgeting analytical process is primarily a function of:

A. ROE.

B. ROI.

C. the cost of acquiring the funds that will be invested.

D. the discount rate.

30. For most firms, the cost of capital is probably in the range of:

A. the prime rate, plus or minus 2 percentage points.

B. less than 10%.

C. between 10% and 20%.

D. more than 20%.