Answered: Prentice Company is considering…

Prentice Company is considering dropping one of its product lines. What costs of the product linewould be relevant to this decision? What costs would be irrelevant?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 8MCQ: In a make-or-buy decision, a. the company must choose between expanding or dropping a product line....

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Prentice Company is considering dropping one of its product lines. What costs of the product line
would be relevant to this decision? What costs would be irrelevant?

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In deciding whether to drop its electronics product line, Smith Company should consider a. how dropping the electronics product line would affect sales of its other products. b. the costs it could save by dropping the product line. c. the revenues it would lose from dropping the product line. d. All of the above.
In deciding whether to drop its electronics product line, Smith Company should consider how dropping the electronics product line would affect sales of its other products. the costs it could save by dropping the product line. the revenues it would lose from dropping the product line. All of the above.
Which of the following is not a consideration when a manager is deciding to discontinue a product or product line? Whether the product has a positive or negative contribution margin. Determining if direct fixed costs could be avoided if the product or product line is discontinued. If discontinuing the product or product line will affect sales of remaining products. Not having any free capacity.
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Which of the following statements are false? SELECT ALL THAT APPLY a. One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. b. A new fixed cost that must be paid if a special offer is accepted is not relevant in making the decision. c. A cost that will be incurred regardless of which course of action a manager takes is relevant to the manager's decision. d. Your Company is considering replacing Machine X. The original cost of Machine X is not relevant to this decision.
Samsung must confront sunk costs. Why are sunk costs irrelevant in deciding whether to sell a product in its present condition or to make it into a new product through additional processing?
ABC Co.,is analyzing whether to expand operations by adding a new product line. Which of the following choices correctly identifies the costs that should be considered in this decision? none of the costs noted opportunity costs only sunk costs only
“If a product is generating a loss, then it should be discontinued.” Do you agree? Explain.
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Which one of the following statement is not correct? Group of answer choices -Opportunity costs are only considered when resources are limited. -Break-even analysis is used to determine how many units of a product or a service a business has to sell to cover all its costs. -Both fixed and variable costs influence short-term decision-making. -Short-term decision-making is all about analysing those costs that will change as a result of taking a particular action.