Question

A decision maker favors a buy choice when some of the qualitative factors include

	a.	quality of vendor, reliability of product, and impact of changing employees
	b.	quality of product, reliability of vendor, and impact of changing technology
	c.	quality of product, reliability of vendor, and impact of changing management
	d.	quality of product, reliability of variable costs, and impact of changing technology

How are selling and administrative costs treated under variable costing?

		as a product cost
		as a service cost
		as a period cost
		as product and service costs

To earn an after-tax profit when using the cost-volume-profit computations, a company must:

		gross-up production
		gross-up costs
		gross-up sales
		gross-up sales and fixed costs

Answer 1

(1)

OPTION b: quality of product, reliability of vendor, and impact of changing technology

EXPLANATION:

These are the relevant qualitative factors which is relevant for the decision maker to take the buy-decision.

(2)

OPTION: as a period cost

EXPLANATION:

selling and administrative costs are not directly related to manufacture of a product.

(3)

OPTION: gross up sales

EXPLANATION:

under the cost volume profit analysis to earn profit, sales volume must go high. Therefore an after-tax profit company must gross up sales