Question

1. In a make or buy decision

a. only conversion costs are relevant.

b. fixed costs that will continue regardless of the decision are relevant.

c. fixed costs that can be avoided in the future are relevant.

d. only variable costs are relevant.

e. opportunity costs are not relevant.

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2. In scarce resources decisions, the decision focus is on

            a. incremental cost per unit of output.

            b. incremental cost per unit of scarce resource.

            c. contribution margin per unit of output.

            d. contribution margin per unit of scarce resource.

            e. revenue per unit of output.

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3.   In some cases, the payback reciprocal can be used to estimate the:

      a. internal rate of return

      b. accounting rate of return

      c. profitability index

      d. net present value

      e. net initial investment

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4.   Stock dividends:

            a) reduce total assets.

            b) reduce total equity.

            c) increase total assets.

            d) increase total equity.

            e) None of the above is correct.

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5.         Retained earnings is affected by each of the following except a:

            a.   cash dividend.

            b.   large stock dividend.

            c.   small stock dividend.

            d.   stock split.

            e.   Both (b) and (c) are correct.

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6.         A company pays dividends of $1 per share per year. The company has 1,000,000 shares authorized, 700,000 shares issued, and 600,000 shares outstanding in 2018. The amount of dividends paid in 2018 is:

            a. $1,000,000

            b. $700,000

            c. $600,000

            d. $1,300,000

            e. None of the above is correct.

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7. Reverse stock splits:

1. Cause the dollar amount in the common stock account to increase.
2. Result in a loss that is reported on the income statement.
3. Increase the number of shares outstanding.
4. Increase the par value per share.
5. Both (a) and (d) are true.

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8. Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting Accounts Receivable and debiting:

A) Sales Revenue.

B) Sales Discounts.

C) Sales Returns & Allowances.

D) Allowance for Bad Debts.

E) Service Fee Expense.

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9.   For decision making, sunk costs are:

      a. treated the same as unavoidable direct fixed costs.

      b. treated the same as avoidable direct fixed costs.

      c. treated the same as opportunity costs.

      d. relevant for outsourcing decisions.

      e. relevant if they are common costs.

Answer 1

Q1

a)Conversion cost includes direct material, direct labor, overhead to transform raw material in to finished goods.

b)Fixed cost involve indirect fixed cost, non cash expenses, commited cost, sunk cost these cost are non relevant cost in make or buy decision. Due to continuation of these cost regardles of decision. It non relevant cost

c) cost that can be avoided not irrelevant. Therefore fixed cost avoided in future is relevant

d)Fixed cost that are relating to product is relevant. It is called as direct fixed cost.

E) Opportunity cost is the cost that arises due to forgive of an alternative. Therefore it is relevant.

Therefore in make or buy decision option (c) is right answer