MGAB03H3 Chapter Notes -Sunk Costs
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| MULTIPLE CHOICE: 1. Which of the following is never considered in incrementalanalysis? A. Incremental revenue B. Sunk costs C. Incremental profit D. Differential costs |
| 2. When deciding between two alternatives, the preferredalternative always has: A. No opportunity costs B. Greater revenues than the other alternatives C. Less expense than the other alternatives D. Greater incremental profit than the other alternatives |
| 3. A company is trying to decide whether to keep or drop thesporting goods department in its department store. If the segmentis dropped, the manager will be fired. The managerâs salary, inrelation to the decision ti keep or drop the sporting department,is: A. Avoidable and therefore relevant B. Not avoidable and therefore relevant C. Sunk and therefore not relevant D. The same for all alternatives and therefore not relevant |
| 4. A product line should be dropped when: A. It has a negative contribution margin B. Its avoidable fixed cost are greater than its contributionmargin C. There will be a positive change in income if the product lineis dropped D. All of above |
| 5. Joint cost are: A. The cost of the common inputs for joint products B. Greater when there are more joint products C. Unnecessary if the accounting system is moresophisticated D. Only used when there are no opportunity costs involved in thedecision |
