Question 1

Select the correct statement regarding relevant revenues.

Accepted Answer

A)  Relevant revenues must not differ between the alternatives being considered. 
B)  Past or future revenues may be relevant. 
C)  Relevant revenues must make a difference in the decision under consideration. 
D)  Revenues are not considered relevant in the same way as relevant costs. 
A)  Relevant revenues must not differ between the alternatives being considered. 
B)  Past or future revenues may be relevant. 
C)  Relevant revenues must make a difference in the decision under consideration. 
D)  Revenues are not considered relevant in the same way as relevant costs.

Question 2

Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs:   The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. If the company decides to make the parts, total costs will be:

Accepted Answer

A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased. 
A)  $10,500 more than if the switches are purchased. 
B)  $27,000 less than if the switches are purchased. 
C)  $20,000 less than if the switches are purchased. 
D)  $30,500 more than if the switches are purchased.

Question 3

Taylor Company is considering whether or not to replace a drill press that is several years old. The current market value of the old equipment is an opportunity cost of replacing the drill press.

Accepted Answer

A) True 
 B)False

Question 4

For many managerial decisions (such as outsourcing and special order decisions), unit-level costs are avoidable costs.

Accepted Answer

A) True 
 B)False

Question 5

Fixed costs are relevant for decision making if they vary between the alternatives and are future-oriented.

Accepted Answer

A) True 
 B)False

Question 6

Max bought a ticket to the championship baseball game for $75. Someone approaches him outside the stadium and offers him $175 for his ticket. If Max decides to go to the game, instead of selling his ticket, how much does it cost Max to go to the game?

Accepted Answer

A)  $75 
B)  $100 
C)  $175 
D)  None of the above. 
A)  $75 
B)  $100 
C)  $175 
D)  None of the above.

Question 7

Qualitative information is relevant when:

Accepted Answer

A)  it makes a difference in the decision and it differs between the alternatives. 
B)  it differs between the alternatives only. 
C)  it makes a difference in the decision only. 
D)  None of the above. 
A)  it makes a difference in the decision and it differs between the alternatives. 
B)  it differs between the alternatives only. 
C)  it makes a difference in the decision only. 
D)  None of the above.

Question 8

Sunk costs:

Accepted Answer

A)  are not considered when evaluating new proposals. 
B)  differ among the alternatives. 
C)  impact the future. 
D)  are relevant. 
A)  are not considered when evaluating new proposals. 
B)  differ among the alternatives. 
C)  impact the future. 
D)  are relevant.

Question 9

Select the correct statement regarding quantitative and qualitative information.

Accepted Answer

A)  To be relevant, qualitative data need not be quantified. 
B)  Relevant information cannot have both quantitative and qualitative characteristics. 
C)  Qualitative data should only be considered when quantitative data are inconclusive. 
D)  To be relevant, qualitative data need not differ between the alternatives but must be future-oriented. 
A)  To be relevant, qualitative data need not be quantified. 
B)  Relevant information cannot have both quantitative and qualitative characteristics. 
C)  Qualitative data should only be considered when quantitative data are inconclusive. 
D)  To be relevant, qualitative data need not differ between the alternatives but must be future-oriented.

Question 10

Select the correct statement regarding relevant costs and revenues.

Accepted Answer

A)  Sunk costs are relevant for decision-making purposes. 
B)  Relevant costs are frequently called unavoidable costs. 
C)  Direct labor is an example of a unit-level cost. 
D)  Only variable costs are relevant for decision making. 
A)  Sunk costs are relevant for decision-making purposes. 
B)  Relevant costs are frequently called unavoidable costs. 
C)  Direct labor is an example of a unit-level cost. 
D)  Only variable costs are relevant for decision making.

Question 11

Which of the following statements is incorrect?

Accepted Answer

A)  An outsourcing decision typically affects only product-level costs. 
B)  Accepting a special order will involve incurring unit-level costs. 
C)  Eliminating a business segment often allows a company to avoid some facility-level costs. 
D)  Facility-level costs generally are not relevant in special order decisions. 
A)  An outsourcing decision typically affects only product-level costs. 
B)  Accepting a special order will involve incurring unit-level costs. 
C)  Eliminating a business segment often allows a company to avoid some facility-level costs. 
D)  Facility-level costs generally are not relevant in special order decisions.

Question 12

The benefits sacrificed when one alternative is chosen over another are referred to as:

Accepted Answer

A)  Avoidable costs. 
B)  Opportunity costs. 
C)  Sacrificial costs. 
D)  Beneficial costs. 
A)  Avoidable costs. 
B)  Opportunity costs. 
C)  Sacrificial costs. 
D)  Beneficial costs.

Question 13

Direct labor is an example of a product-level cost.

Accepted Answer

A) True 
 B)False

Question 14

Expected future revenues that differ among the alternatives under consideration are often referred to as:

Accepted Answer

A)  Alternative revenues. 
B)  Preferential revenues. 
C)  Relative revenues. 
D)  Differential revenues. 
A)  Alternative revenues. 
B)  Preferential revenues. 
C)  Relative revenues. 
D)  Differential revenues.

Question 15

Segment reports are used to evaluate the true profitability of a company's business segments.

Accepted Answer

A) True 
 B)False

Question 16

Asset replacement decisions involve:

Accepted Answer

A)  choices between continuing using existing materials or replacing them with less expensive materials. 
B)  choices between closing down or continuing to operate a segment of a business. 
C)  choices between continuing operating existing equipment or replacing it with new equipment. 
D)  None of the above. 
A)  choices between continuing using existing materials or replacing them with less expensive materials. 
B)  choices between closing down or continuing to operate a segment of a business. 
C)  choices between continuing operating existing equipment or replacing it with new equipment. 
D)  None of the above.

Question 17

Which of the following is a true statement regarding product-level costs?

Accepted Answer

A)  Product-level costs are only relevant to a decision when adding a product to a company's product line. 
B)  Product-level costs are generally relevant to outsourcing decisions. 
C)  Product-level costs are generally relevant to special order decisions. 
D)  Product-level costs are incurred to support the entire company. 
A)  Product-level costs are only relevant to a decision when adding a product to a company's product line. 
B)  Product-level costs are generally relevant to outsourcing decisions. 
C)  Product-level costs are generally relevant to special order decisions. 
D)  Product-level costs are incurred to support the entire company.

Question 18

An alternative under consideration involves incurring $50 in costs to generate $60 in revenue. The differential revenue for this alternative is $10.

Accepted Answer

A) True 
 B)False

Question 19

Easton Company makes and sells scooters. Easton incurred the following costs in its most recent fiscal year:   Easton can currently purchase the scooters it makes from another company. If the company purchases the scooters, Easton would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified as a facility-level cost?

Accepted Answer

A)  Inspection costs 
B)  Shipping and handling 
C)  Materials cost 
D)  Company president's salary 
A)  Inspection costs 
B)  Shipping and handling 
C)  Materials cost 
D)  Company president's salary

Question 20

Which of the following costs is an example of a batch-level cost?

Accepted Answer

A)  Assembly setup costs 
B)  Materials handling costs 
C)  Shipping and handling costs to ship an order to a customer 
D)  All of the above. 
A)  Assembly setup costs 
B)  Materials handling costs 
C)  Shipping and handling costs to ship an order to a customer 
D)  All of the above.

Select the correct statement regarding relevant revenues.

Taylor Company is considering whether or not to replace a drill press that is several years old. The current market value of the old equipment is an opportunity cost of replacing the drill press.

For many managerial decisions (such as outsourcing and special order decisions), unit-level costs are avoidable costs.

Fixed costs are relevant for decision making if they vary between the alternatives and are future-oriented.

Max bought a ticket to the championship baseball game for $75. Someone approaches him outside the stadium and offers him $175 for his ticket. If Max decides to go to the game, instead of selling his ticket, how much does it cost Max to go to the game?

Qualitative information is relevant when:

Sunk costs:

Select the correct statement regarding quantitative and qualitative information.

Select the correct statement regarding relevant costs and revenues.

Which of the following statements is incorrect?

The benefits sacrificed when one alternative is chosen over another are referred to as:

Direct labor is an example of a product-level cost.

Expected future revenues that differ among the alternatives under consideration are often referred to as:

Segment reports are used to evaluate the true profitability of a company's business segments.

Asset replacement decisions involve:

Which of the following is a true statement regarding product-level costs?

An alternative under consideration involves incurring $50 in costs to generate $60 in revenue. The differential revenue for this alternative is $10.

Which of the following costs is an example of a batch-level cost?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 13: Relevant Information for Special Decisions

Select the correct statement regarding relevant revenues.

Taylor Company is considering whether or not to replace a drill press that is several years old. The current market value of the old equipment is an opportunity cost of replacing the drill press.

For many managerial decisions (such as outsourcing and special order decisions), unit-level costs are avoidable costs.

Fixed costs are relevant for decision making if they vary between the alternatives and are future-oriented.

Max bought a ticket to the championship baseball game for $75. Someone approaches him outside the stadium and offers him $175 for his ticket. If Max decides to go to the game, instead of selling his ticket, how much does it cost Max to go to the game?

Qualitative information is relevant when:

Sunk costs:

Select the correct statement regarding quantitative and qualitative information.

Select the correct statement regarding relevant costs and revenues.

Which of the following statements is incorrect?

The benefits sacrificed when one alternative is chosen over another are referred to as:

Direct labor is an example of a product-level cost.

Expected future revenues that differ among the alternatives under consideration are often referred to as:

Segment reports are used to evaluate the true profitability of a company's business segments.

Asset replacement decisions involve:

Which of the following is a true statement regarding product-level costs?

An alternative under consideration involves incurring $50 in costs to generate $60 in revenue. The differential revenue for this alternative is $10.

Which of the following costs is an example of a batch-level cost?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters