01 Oct The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is
The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is
a. manufacturing margin
b. contribution margin
c. differential cost
d. differential revenue
Question 2 A cost that will not be affected by later decisions is termed a(n)
sunk cost
period cost
differential cost
replacement cost
Question 3The amount of income that would result from an alternative use of cash is called:
opportunity cost
differential income
sunk cost
differential revenue
Question 4Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional cost of $31 per pound to produce. What is the differential cost of producing Product C?
$31 per pound
$30 per pound
$28 per pound
$55 per pound
Question 5A practical approach that is frequently used by managers when setting normal long-run prices is the
cost-plus approach
economic theory approach
price graph approach
price skimming
Question 6Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of
capital investment analysis
sales mix analysis
variable cost analysis
variable cost analysis
Question 7Which of the following are two methods of analyzing capital investment proposals that both ignore present value?
average rate of return and cash payback method
internal rate of return and average rate of return
net present value and average rate of return
internal rate of return and net present value
Question 8The primary advantages of the average rate of return method are its ease of computation and the fact that
it is especially useful to managers whose primary concern is liquidity
it emphasizes the amount of income earned over the life of the proposal
it is especially useful to managers whose primary concern is liquidity
there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short-term
rankings of proposals are necessary
Question 9The expected average rate of return for a proposed investment of $6,000,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $12,000,000 over the 20 years is
20%
10%
40%
5%
Question 10Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows?
internal rate of return method
cash payback method
net present value method
average rate of return method
