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| 1 | |
Which of the following is the first step in the decision-making process? |
| | A) | Clarify the decision problem |
| | B) | Collect the data |
| | C) | Select an alternative |
| | D) | Develop a decision model |
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| 2 | |
Which is of the following is the fourth step of the decision-making process? |
| | A) | Identify the alternatives |
| | B) | Collect the data |
| | C) | Select an alternative |
| | D) | Develop a decision model |
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| 3 | |
Which of the following is the 6th and final step in the decision-making process? |
| | A) | Identify the alternatives |
| | B) | Develop a decision model |
| | C) | Select an alternative |
| | D) | Clarify the decision problem |
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| 4 | |
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Which is the proper order or sequence of these steps? |
| | A) | 1, 6, 2, 4, 3, 5 |
| | B) | 1, 3, 4, 6, 4, 5 |
| | C) | 3, 2, 4, 1, 6, 5 |
| | D) | 4, 6, 1, 5, 3, 2 |
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| 5 | |
Which of the following is a qualitative characteristic? |
| | A) | The airline uses an average of 120 meals per scheduled interstate flight. |
| | B) | Airline passengers rate the meals as poor to excellent. |
| | C) | Twenty percent of the airline dinner meals served have a dish that includes chicken. |
| | D) | Vendor A delivers the airline meals on time, 98% of the time. |
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| 6 | |
Which of the following is described as data that are pertinent to a decision? |
| | A) | Qualitative characteristics |
| | B) | Accurate information |
| | C) | Timely information |
| | D) | Relevant information |
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| 7 | |
Relevant costs and benefits satisfy which of the following sets of criteria? |
| | A) | They are (1) fixed and (2) variable. |
| | B) | They (1) affect the future and (2) are variable. |
| | C) | They (1) affect the future and (2) differ between alternatives. |
| | D) | They (1) differ between alternatives and (2) are variable. |
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| 8 | |
Which of the following statements is false? |
| | A) | Unique decisions arise infrequently. |
| | B) | Repetitive decisions are made over and over again. |
| | C) | When compared to repetitive decisions, information relevant to unique decisions is harder to generate. |
| | D) | Relevant information for repetitive decisions must involve costs or benefits that are similar between alternatives. |
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| 9 | |
Yesterday, you paid a mechanic $1,400 for installing a new engine in your car, and $320 to have news tire put on the car. The bluebook value your car is $2,000. Today, a car dealer offered you a trade-in allowance of $1,500 toward the purchase of a $23,000 new automobile. The new automobile will cost $500 less per year to operate than the old car. What are your sunk costs, assuming you take the allowance and buy the new car? |
| | A) | $1,720 |
| | B) | $500 |
| | C) | $2,000 |
| | D) | $620 |
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| 10 | |
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What is the total differential cost of replacing the old lathe? |
| | A) | $3,000 |
| | B) | $2,000 |
| | C) | $7,000 |
| | D) | $4,000 |
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| 11 | |
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You've been offered a contract for one of two newspaper routes. Which of the following is true? |
| | A) | The differential revenue between the alternatives favors Route #2. |
| | B) | The differential cost between the alternatives favors Route #2. |
| | C) | You should contract for Paper Route #1. |
| | D) | Both (B), and (C) are true. |
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| 12 | |
Which of the following statements is false? |
| | A) | Information is relevant if it is pertinent to a decision problem. |
| | B) | Relevant information has a bearing on the future. |
| | C) | Sunk costs are irrelevant to decision problems. |
| | D) | Opportunity costs are irrelevant to decision problems. |
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| 13 | |
You are currently working a 40-hour workweek for $15 an hour. The only accounting course you are able to enroll in will require that you reduce your workweek to 35 hours. The accounting course and materials will cost $450. Transportation to and from college will cost $10 per week for 12 weeks. What is your opportunity cost if you decide to enroll in the accounting course? |
| | A) | $450 |
| | B) | $630 |
| | C) | $900 |
| | D) | $570 |
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| 14 | |
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The company has capacity to produce 100,000 units without incurring any additional fixed expenses. Which of the following is true if the company accepts a special price of $6 per unit for 10,000 units? |
| | A) | The special price will result in a contribution of $40,000. |
| | B) | The special price will result in a contribution of $30,000. |
| | C) | The special price should be rejected. |
| | D) | The special price will result in loss on the offer. |
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| 15 | |
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The company has no excess capacity. Which of the following is true if the company accepts a special offer of $8 per unit for 10,000 units? |
| | A) | The company should accept the special offer. |
| | B) | The company will have a $60,000 loss from the special offer. |
| | C) | The per-unit fixed cost will increase. |
| | D) | Both (B) and (C) are true. |
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| 16 | |
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If the component is purchased, the labor will be shifted to another product. Each finished product uses one component. Production of 2,000 finished products is expected each accounting period. Which of the following is true? |
| | A) | If components are outsourced, the firm will gain $3,000 |
| | B) | If components are outsourced, the firm will lose $1,500. |
| | C) | The components should be outsourced. |
| | D) | The components should not be outsourced. |
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| 17 | |
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If the Paint Department is discontinued, what will be the change in profit or loss for the company? |
| | A) | Profit will increase $5,000. |
| | B) | Profit will decrease $2,000. |
| | C) | Profit will increase $1,000. |
| | D) | Profit will increase $18,000. |
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| 18 | |
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What are the total joint cost and the allocated joint cost to Peanut oil, respectively? |
| | A) | $3,000 and $1,000 |
| | B) | $2,000 and $200 |
| | C) | $3,000 and $200 |
| | D) | $840 and $84 |
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| 19 | |
The cost of Oak logs is $120 per thousand board feet. Typically, an Oak log can be cut into three grades of lumber: Floor, Cabinet, and Furniture, in a ratio of 5:4:1. The sales values of the three grades are $400, $300, and $150 per thousand board feet, respectively. Ten thousand board feet of Oak logs were purchased and processed. How much of this joint cost should be allocated to the Floor grade under the relative sales value method? |
| | A) | $600 |
| | B) | $1,000 |
| | C) | $750 |
| | D) | $300 |
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| 20 | |
Raw Material Q produces joint products A and B in a ratio of 7:3. At the split-off point the sales values of A and B are $8 and $12, each, respectively. By further processing, Product A will produce Product C, and Product B will produce Product D. The separable processing costs for producing Products C and D are $4 and $7, each, respectively. Products C and D have sales values of $14.00 and $18.50, each, respectively. Ten thousand units of Raw Material Q are to be processed. Which of the following is true? |
| | A) | There is insufficient information to make a continue- or discontinue-decision. |
| | B) | The firm should continue producing product D. |
| | C) | The firm should continue producing product C. |
| | D) | The firm should discontinue producing product A. |
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| 21 | |
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Given an opportunity to use unscheduled machine hours to fill a special order for either A or B, which of the following is TRUE? |
| | A) | Product A should be manufactured, exclusively. |
| | B) | Product B should be manufactured, exclusively. |
| | C) | Fifteen units of A and thirty-five units of B should be manufactured. |
| | D) | All of the above are true. |
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| 22 | |
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Three hundred machine hours are available, 250 machine hours are scheduled. The firm has an opportunity to use the unscheduled machine hours to fill a special order for either A or B. However the contribution margin for Product B may be 10% lower than anticipated. Which of the following is true? |
| | A) | Selecting B over A could produce less total contribution margin. |
| | B) | Product A should be manufactured, if the decrease is 4.0%. |
| | C) | Thirty-five units of A and twenty units of B should be manufactured. |
| | D) | All of the above are true |
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| 23 | |
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What are the expected values for Product A and Product B, respectively? |
| | A) | $2.74 and $4.32, respectively |
| | B) | $2.74 and $4.35, respectively |
| | C) | $2.80 and $4.32, respectively |
| | D) | $2.80 and $4.35, respectively |
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| 24 | |
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Which of the following is true with regard to the expected value of the contribution per machine hour? |
| | A) | The expected value of contribution per machine hour for Product A is $77.40. |
| | B) | The expected value of contribution per machine hour for Product B is $86.00. |
| | C) | The expected value of contribution per machine hour for Product B is $62.14. |
| | D) | The expected value of total contribution per machine hour is $99.00. |
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| 25 | |
Which of the following will relax a constraint? |
| | A) | Outsourcing all or part of the bottleneck operation |
| | B) | Working overtime at the bottleneck operation |
| | C) | Retraining employees and shifting them from the bottleneck |
| | D) | Options (A) and (B) |
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| 26 | |
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Direct material and direct labor costs for packaging are $100,000 and $120,000, respectively. The bid from an outside vendor to provide the packaging is $320,000. Which of the following is true? |
| | A) | The total relevant cost to the outsourcing decision is $148,100. |
| | B) | The total relevant cost to the outsourcing decision is $220,000. |
| | C) | The supervisory salaries and purchase order costs are not relevant. |
| | D) | The outsourcing bid is $48,100 less than the cost to produce the packaging. |
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| 27 | |
When discussing the pitfalls to avoid in decision-making, four morals emerge. Which is not one of those morals? |
| | A) | Ignore sunk costs. |
| | B) | Beware of unitized fixed costs in decision-making. |
| | C) | Beware of allocated fixed costs; identify the avoidable costs. |
| | D) | Do not overlook the time value of money in short-run decisions. |
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| 28 | |
A manager insists that the book value of antiquated equipment be included as relevant information in the decision-making process to replace the equipment. Which one of the morals that arise from the common mistakes made in decision making is relevant to this situation? |
| | A) | Ignore sunk costs. |
| | B) | Beware of unitized fixed costs in decision-making. |
| | C) | Beware of allocated fixed costs; identify the avoidable costs. |
| | D) | Do not overlook the time value of money in short-run decisions |
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