13. Which of the following is a short-term decision in which opportunity costs are not relevant?

a. Make-or-buy decision.
b. Special-order decision.
c. Drop-a-segment decision.
d. None of the above.

c 14. Which of the following is a true statement?

a. Theory of Constraints is useful for identifying physical constraints but cannot incorporate nonphysical constraints.
b. Theory of Constraints is useful in analyzing internal constraints but cannot identify external constraints.
c. Constraints may be either internal or external.
d. Internal constraints are physical while external constraints are imaginary.

b 15. A company has space that it uses to make a component. It could rent the space to another company. The rent is
a. a sunk cost. \
b. an opportunity cost.
c. a joint cost.
d. an avoidable cost.

a 16. Escanaba Company has 200 units of an obsolete component. The variable cost to produce them was $10 per unit. They
could now be sold for $1.75 each and it would cost $7.60 to make them now. If the units could be used to make a
product for a special order, their relevant cost is
a. $ 1.75.
b. $ 7.60.
c. $10.00.
d. some other number.

c 17. In a make-or-buy decision, which of the following is true?

a. Variable costs are the only relevant costs.
b. Allocated fixed costs are relevant.
c. Alternative uses of space and machinery are relevant.
d. Making is the correct decision when there is idle capacity.

a 18. The best characterization of an opportunity cost is that it is

a. relevant to decision making but is not usually reflected in accounting records.
b. not relevant to decision making and is not usually reflected in accounting records.
c. relevant to decision making and is usually reflected in accounting records.
d. not relevant to decision making and is usually reflected in accounting records.

a 19. A sunk cost is

a. not avoidable.
b. avoidable under one alternative but not under another.
c. joint or common.
d. direct to a segment.

b 20. Differential costs are costs that are

a. not avoidable.
b. avoidable under one alternative but not under another.
c. joint or common.
d. not direct to a segment.

a 21. A common cost

a. relates to a process that produces more than one product.
b. should be allocated to the segments of a company.
c. can usually be avoided in its entirety by dropping a segment.
d. none of the above.

a 22. An opportunity cost commonly associated with a special order is

a. the contribution margin on lost sales.
b. the variable costs of the order.
c. additional fixed costs related to the increased output.
d. any of the above.
b 23. Which of the following statements pertaining to the Theory of Constraints is true?
a. Inventory is evil and should never be kept.
b. Inventory is important to keep immediately before a bottleneck process.
c. Inventory should be kept before every machining process to prevent any downtime.
d. None of the above are true.

c 24. Which of the following cost-classification schemes is most relevant to decision making?
a. Fixed--variable.
b. Joint--common
c. Avoidable--unavoidable.
d. Direct--common.

d 25. Which of the following is NOT relevant in deciding whether to process a joint product beyond its split-off point?
a. The split-off value.
b. The price after additional processing.
c. The cost of further processing.
d. The cost of operating the joint process.