BOMI BUDGETING AND ACCOUNTING
COMPREHENSIVE EXAM STUDY GUIDE
COMPLETE QUESTIONS AND SOLUTIONS
●● Which of the following will always be a relevant cost?
Answer: Opportunity Cost
●● Which of the following is an irrelevant cost?
Answer: A sunk cost
●● Nonfinancial information that management might evaluate in making
a decision would not include
Answer: contribution margin
●● Incremental analysis would not be appropriate for
Answer: analysis of manufacturing variances.
●● In incremental analysis,
Answer: all costs are relevant if they change between alternatives.
●● If a company anticipates that other sales will be affected by the
acceptance of a special order, then
, Answer: lost sales should not be considered in the incremental analysis.
●● Canosta, Inc. determined that it must expand its capacity to accept a
special order. Which situation is likely?
Answer: Both variable and fixed costs will be relevant.
●● Argus Company anticipates that other sales will be affected by the
acceptance of a special order. What should the company do?
Answer: Consider the opportunity cost of lost sales in the incremental
analysis.
●● in the analysis concerning the acceptance or rejection of a special
order, which items are relevant?
Answer: Variable costs and avoidable costs.
●● In a make-or-buy decision, which costs can be considered relevant?
Answer: Incremental variable costs, incremental fixed costs, and
opportunity costs.
●● Which statement is true concerning the decision rule on whether to
make or buy?
Answer: The company should buy if the cost of buying is less than the
cost of producing.
COMPREHENSIVE EXAM STUDY GUIDE
COMPLETE QUESTIONS AND SOLUTIONS
●● Which of the following will always be a relevant cost?
Answer: Opportunity Cost
●● Which of the following is an irrelevant cost?
Answer: A sunk cost
●● Nonfinancial information that management might evaluate in making
a decision would not include
Answer: contribution margin
●● Incremental analysis would not be appropriate for
Answer: analysis of manufacturing variances.
●● In incremental analysis,
Answer: all costs are relevant if they change between alternatives.
●● If a company anticipates that other sales will be affected by the
acceptance of a special order, then
, Answer: lost sales should not be considered in the incremental analysis.
●● Canosta, Inc. determined that it must expand its capacity to accept a
special order. Which situation is likely?
Answer: Both variable and fixed costs will be relevant.
●● Argus Company anticipates that other sales will be affected by the
acceptance of a special order. What should the company do?
Answer: Consider the opportunity cost of lost sales in the incremental
analysis.
●● in the analysis concerning the acceptance or rejection of a special
order, which items are relevant?
Answer: Variable costs and avoidable costs.
●● In a make-or-buy decision, which costs can be considered relevant?
Answer: Incremental variable costs, incremental fixed costs, and
opportunity costs.
●● Which statement is true concerning the decision rule on whether to
make or buy?
Answer: The company should buy if the cost of buying is less than the
cost of producing.
