Acc Multiple Choice Questions Solutions
19. Allegiance, Inc. has $125,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $45,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $23,000. There the goods could be sold for $80,000. What alternative is more desirable and what is the relevant cost for that alternative?
A. Sell "as is," $125,000.
B. Clean and ship to outlet center, $23,000.
C. Clean and ship to outlet center, $103,000.
D. Clean and ship to outlet center, $148,000.
E. Neither alternative is desirable, as both produce a loss for the firm.
Value gained if goods sold the goods “as is” = $45,000
Value gained if goods are cleaned and shipped and then sold = $80,000 - $23,000 = $57,000
As the value gained if the goods are cleaned is more, so cleaning and shipping should be done. Cost associates is given as $23,000
20. In early July, Mike Gottfried purchased a $70 ticket to the December 15 game of the Chicago Titans. (The Titans belong to the Midwest Football League and play their games outdoors on the shore of Lake Michigan.) Parking for the game was expected to cost approximately $22, and Gottfried would probably spend another $15 for a souvenir program and food. It is now December 14. The Titans were having a miserable season and the temperature was expected to peak at 5 degrees on game day. Mike therefore decided to skip the game and took his wife to the movies, with tickets and dinner costing $50. The sunk cost associated with this decision situation is:
A. $20.
B. $50.
C. $70.
D. $107.
E. some other amount.
Sunk cost is the amount of money already invested, but the utility from it is not experienced or realized. As Mike has only invested $70 which he did not recover as he did not go to the games. He also invested $50 in movies, but then this amount was realized when he saw the movie. So sunk cost is only the cost of tickets purchased. So, sunk cost = $70
21. In early
A. Sell "as is," $125,000.
B. Clean and ship to outlet center, $23,000.
C. Clean and ship to outlet center, $103,000.
D. Clean and ship to outlet center, $148,000.
E. Neither alternative is desirable, as both produce a loss for the firm.
Value gained if goods sold the goods “as is” = $45,000
Value gained if goods are cleaned and shipped and then sold = $80,000 - $23,000 = $57,000
As the value gained if the goods are cleaned is more, so cleaning and shipping should be done. Cost associates is given as $23,000
20. In early July, Mike Gottfried purchased a $70 ticket to the December 15 game of the Chicago Titans. (The Titans belong to the Midwest Football League and play their games outdoors on the shore of Lake Michigan.) Parking for the game was expected to cost approximately $22, and Gottfried would probably spend another $15 for a souvenir program and food. It is now December 14. The Titans were having a miserable season and the temperature was expected to peak at 5 degrees on game day. Mike therefore decided to skip the game and took his wife to the movies, with tickets and dinner costing $50. The sunk cost associated with this decision situation is:
A. $20.
B. $50.
C. $70.
D. $107.
E. some other amount.
Sunk cost is the amount of money already invested, but the utility from it is not experienced or realized. As Mike has only invested $70 which he did not recover as he did not go to the games. He also invested $50 in movies, but then this amount was realized when he saw the movie. So sunk cost is only the cost of tickets purchased. So, sunk cost = $70
21. In early