1) How does a decrease in variable costs affect the break-even volume of sales?
2) In an inflationary period, which cost flow method, LIFO or FIFO, will result in the
larger amount of assets on the balance sheet? Explain.
3) Indicate whether each of the following statements is true or false.
1>A special order should be rejected if avoidable costs exceed differential revenue
2>To analyze a special order decision, a manager should identify differential costs and
revenues
3>A special order decision involves an offer to sell goods at a price that is higher than
normal
4>Availability of idle capacity is often relevant to special order decisions
5>Alternative uses for facilities should not be considered in making a special order
decision
4) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts. Assume use of a perpetual inventory system.
Youkilis Co. returned some defective merchandise it had previously purchased on
account from a supplier. Show how the transaction would affect Youkilis’s financial
statements.
5) When a warranty repair job is completed, what is the effect on the accounting
equation?