CHAPTER 25: DIFFERENTIAL ANALYSIS, PRODUCT PRICING, AND
ACTIVITY-BASED COSTING
1. Differential revenue is the amount of income that would result from the best available alternative proposed use
of cash.
a. True
b. False
2. Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action
as compared with an alternative.
a. True
b. False
3. If the total unit cost of manufacturing Product Y is currently $36 and the total unit cost after modifying the style
is estimated to be $48, the differential cost for this situation is $48.
a. True
b. False
,Chapter 25: Differential Analysis, Product Pricing, and Activity-Based Costing
4. If the total unit cost of manufacturing Product Y is currently $36 and the total unit cost after modifying the style
is estimated to be $48, the differential cost for this situation is $12.
a. True
b. False
Hill Co. can further process Product O to produce Product P. Product O is currently selling for $60 per pound and
costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of
$13 per pound to produce.
5. The differential revenue of producing Product P is $82 per pound.
a. True
b. False
9. Opportunity cost is the amount of increase or decrease in cost that would result from the best available
alternative to the proposed use of cash or its equivalent.
a. True
b. False
, Chapter 25: Differential Analysis, Product Pricing, and Activity-Based Costing
10. Differential analysis can aid management in making decisions on a variety of alternatives, including
whether to discontinue an unprofitable segment and whether to replace usable plant assets.
a. True
b. False
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