Posted: July 9th, 2016

Which of the following costs is NOT relevant to a special-order decision?

4. Assume the following cost behavior data for Portrait Company:

Sales price $18.00 per unit
Variable costs $13.50 per unit
Fixed costs $22,500
Tax rate 40%

What volume of sales dollars is required to earn a before-tax income of $27,000?
a. $198,000
b. $180,000
c. $90,000
d. $270,000

5. Assume the following cost behavior data for Portrait Company:

Sales price $18.00 per unit
Variable costs $13.50 per unit
Fixed costs $22,500
Tax rate 40%

What volume of sales dollars is required to earn an after-tax income of $40,500?
a. $360,000
b. $90,000
c. $252,000
d. $495,000

6. Which of the following statements is TRUE when making a decision between two alternatives?
a. Variable costs may not be relevant when the decision alternatives have the same activity levels.
b. Variable costs are not relevant when the decision alternatives have different activity levels.
c. Sunk costs are always relevant.
d. Fixed costs are never relevant.

7. Which of the following costs is NOT relevant to a special-order decision?
a. the direct labor costs to manufacture the special-order units
b. the variable manufacturing overhead incurred to manufacture the special-order units
c. the portion of the cost of leasing the factory that is allocated to the special order
d. all of these costs are relevant

8. Which of the following costs is NOT relevant to a make-or-buy decision?
a. $10,000 of direct labor used to manufacture the parts
b. $30,000 of depreciation on the plant used to manufacture the parts
c. the supervisor’s salary of $25,000 that will be avoided if the part is purchased from an outside supplier
d. $15,000 in rent from leasing the production space to another company if the part is purchased from an outside supplier