1. Which of the following statements is true? a. In a special order decision, additional fixed costs...

Question:

1. Which of the following statements is true?
a. In a special order decision, additional fixed costs are irrelevant costs.
b. In a keep or drop decision, allocated fixed costs are relevant costs.
c. In a product emphasis decision due to constrained resources, the contribution margin per unit is irrelevant.
d. In a make or buy decision, opportunity cost is irrelevant.

2. In a make or buy decision, which costs are usually irrelevant?
a. Direct material costs
b. Fixed costs that will not change, regardless of the decision
c. Variable sales and administrative costs
d. Variable production costs

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes... Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...