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True or False
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1
Developing a decision model is the first step in the decision-making process.
A)True
B)False
2
Selecting an alternative is the last step in the decision-making process.
A)True
B)False
3
The decision model brings together the elements of the specified criterion, constraints, and alternatives to the decision problem.
A)True
B)False
4
The qualitative considerations that have an effect on decision-making will take place in the last of the six-step decision-making process, which is selecting an alternative.
A)True
B)False
5
Three characteristics of determining information usefulness are: (1) relevance, (2) accuracy, and (3) timeliness.
A)True
B)False
6
Relevant information is the type of information that consists of data that are precise and correct.
A)True
B)False
7
Terms in a decision analysis that describe things as 'good', 'bad', 'motivational', 'impressive', or as 'cutting edge' are examples of quantitative characteristics.
A)True
B)False
8
The two criteria that must be satisfied by relevant information are: (1) it has a bearing on the future and (2) it must involve costs or benefits that differ among the alternatives.
A)True
B)False
9
Relevant information must involve costs or benefits that remain unchanged among the alternatives being considered in a decision problem.
A)True
B)False
10
Decision that are made over and over again, at either regular or irregular intervals, are called unique decisions.
A)True
B)False
11
By providing management with only information about relevant costs and benefits, the managerial accountant can help avoid information overload.
A)True
B)False
12
Sunk costs are irrelevant to decision-making.
A)True
B)False
13
The book value of equipment to be discarded and replaced with newer, more technically advanced equipment is a relevant cost to the decision to replace the old equipment.
A)True
B)False
14
A cost that exists with one of two alternatives but does not exist in the other is called a differential cost.
A)True
B)False
15
Department A's labor cost is $45,000 per month. Installation of a high-speed production machine will reduce labor cost to $30,000. The $15,000 cost reduction through acquisition of the machine is a differential cost.
A)True
B)False
16
The enterprise should modify and use the current parts inventory.
A)True
B)False
17
The potential benefit given up when the choice of one action precludes selection of a different action is called an opportunity cost.
A)True
B)False
18
Opportunity costs are relevant to making a decision.
A)True
B)False
19
A key element in the decision to accept or reject a special offer price on a product or activity is whether the company has excess or unused capacity.
A)True
B)False
20
If the enterprise has capacity to produce 100,000 units without incurring any additional fixed expenses, it should accept a special offer of $4.00 per unit for 10,000 units.
A)True
B)False
21
If the enterprise has no excess capacity, it should accept a special offer of $6.00 per unit for 10,000 units.
A)True
B)False
22
Another term for make-or-buy decision is an outsourcing decision.
A)True
B)False
23
In a make or buy decision, all costs should be determined on a per unit basis so that the cost per unit of making a product can be compared to the cost per unit of purchasing a product.
A)True
B)False
24
For decision-making purposes related to outsourcing decisions, unitized fixed costs should be treated as if they are variable costs.
A)True
B)False
25
When a product or service is discontinued, all of the variable expenses and fixed expenses assigned to the product will be eliminated.
A)True
B)False
26
Expenses that will no longer be incurred if a particular action is taken are called avoidable expenses.
A)True
B)False
27
Expenses that will continue to be incurred even if a subunit or activity is eliminated are called unavoidable expenses.
A)True
B)False
28
If a subunit or activity is discontinued, only the avoidable expenses will be saved.
A)True
B)False
29
The process of sawing logs into various grades and sizes of lumber is an example of a joint production process.
A)True
B)False
30
The point at which the processing of crude oil results in gasoline, kerosene, and diesel is called the split-off point.
A)True
B)False
31
A $2.40 per pound cost for beef cattle, before they are slaughtered and cut into identifiable grades and cuts of beef, is called a joint cost.
A)True
B)False
32
The decision to further process a joint product into other products or to change its characteristics is dependent upon the amount of total joint cost at the split-off point.
A)True
B)False
33
When joint products are allocated joint costs on the basis of their sales prices, the allocation method is called the relative-sales-value method.
A)True
B)False
34
Joint product A should be allocated $96,000 of the joint costs.
A)True
B)False
35
A separable process cost is a cost incurred before the split-off point.
A)True
B)False
36
If the separable processing costs will exceed the incremental revenue from further processing, there is no net benefit from further processing.
A)True
B)False
37
A bottleneck operation is a process through which every unit of product must pass before moving on to other operations.
A)True
B)False
38
Bottleneck operations can be relaxed through outsourcing.
A)True
B)False
39
For decisions involving limited resources, the contribution margin per unit of product is more relevant to a decision than the contribution margin per unit of limited resource.
A)True
B)False
40
To determine what would happen in a decision analysis if a key prediction or assumption proves to be wrong, managers will use sensitivity analysis.
A)True
B)False
41
Sensitivity analysis is useful in decision making when there is a degree of uncertainty about the relevant data.
A)True
B)False
42
The sum of the possible values for a random variable, each weighed by its probability, is called the expected value.
A)True
B)False
43
The expected value is $2.25
A)True
B)False
44
A major difference between conventional and activity-based costing analysis is in the identification of avoidable and unavoidable costs.
A)True
B)False
45
An important link between decision making and managerial performance evaluation is the incentives for decision makers.
A)True
B)False
46
The factors used to arrive at short-run decisions and long-run decisions are the same.
A)True
B)False
47
One of the four common mistakes (pitfalls to avoid) in decision-making is considering sunk costs as relevant.
A)True
B)False
48
One of the four common mistakes (pitfalls to avoid) in decision-making is unitizing fixed costs.
A)True
B)False
49
One of the four common mistakes (pitfalls to avoid) in decision-making is ignoring opportunity costs.
A)True
B)False
50
One of the four common mistakes (pitfalls to avoid) in decision-making is considering allocated fixed costs as avoidable fixed costs.
A)True
B)False





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