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Jacket
Business Accounting and Finance
Tony Davies, University of Wales, Lampeter, UK
Brian Pain, University of Luton, UK
Decision-making

Self-test Questions



1

The decision-making process requires
A)the use of large amounts of historical data
B)a disregard of forecasts
C)analysis of the most recent profit and loss account of the business
D)a disregard of non-relevant costs
2

Which of the following costs is relevant in decision-making?
A)historical costs
B)accounting costs
C)cash costs
D)committed costs
3

An opportunity cost is the cost of
A)the next best alternative course of action
B)lost business
C)obtaining new business opportunities
D)unplanned new business
4

Which of the following costs is not relevant when considering the closure of a department within a factory?
A)direct labour
B)variable overheads
C)direct materials
D)fixed overheads
5

Which of the following may form the basis for the price a company (working at full capacity) should charge for a one-off order?
A)opportunity costs plus marginal costs
B)direct labour plus materials costs
C)direct and indirect costs
D)variable costs
6

In a make versus buy decision which of the following factors is not relevant?
A)opportunity cost of alternative activities
B)reliability of bought-in products
C)fixed production costs
D)reliability of supplier
7

A department makes a product whose contribution per unit is 1,000 pounds, and which takes 20 hours machine time. A component used in this product with a marginal cost of 300 pounds (taking 5 hours of machine time) could be purchased from an external supplier. The department is working at full capacity. What is the maximum price that the company may pay to buy the component from an external supplier?
A)500 pounds
B)525 pounds
C)575 pounds
D)600 pounds
8

In a product mix decision, which is the most important factor to consider to try and maximise profit?
A)product unit selling price
B)contribution per unit of the product
C)variable cost per unit of the product
D)contribution per unit of a scarce resource used to make the product
9

Sales pricing decisions do not usually consider
A)elasticity of demand for the product
B)costs of competitors products
C)total product absorption costs
D)prices of competitors products
10

Which of the following is not a feature of full cost plus sales pricing related to a range of a company's products?
A)it ignores the relationship between demand and prices
B)it may not maximise profit
C)it requires the apportionment of shared costs
D)it distinguishes between variable, fixed and opportunity costs






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