Posted: August 25th, 2016

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

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