Quantity Price Cost Accounting A Managerial Emphasis 7th Canadian By Charles – Test Bank

Chapter 11 Decision Making and Relevant Information

11.1 Distinguish relevant from irrelevant information in decision situations.

1) A decision model is a formal method of making a choice that uses only quantitative analyses.
Answer: FALSE
Explanation: A decision model is a formal method of making a choice that often involves both quantitative and qualitative analyses.
Diff: 1 Type: TF
Skill: Remember
Objective: LO 11-1

11.2 Identify the differences among relevant costs for short-term and long-term production output decisions.

1) The purpose of evaluating performance in the decision process is to provide feedback.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 11-2

2) Anticipated future costs that differ with alternative courses of action are known as relevant costs.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 11-2

3) Divisional revenues which remain at the same level from year to year are known as relevant revenues.
Answer: FALSE
Explanation: Relevant revenues are expected future revenues.
Diff: 2 Type: TF
Skill: Remember
Objective: LO 11-2

4) The total cost difference between two separate alternatives in a decision making process is the net relevant cost.
Answer: TRUE
Diff: 2 Type: TF
Skill: Understand
Objective: LO 11-2

5) Each item included in the relevant-cost analysis should differ according to the alternative being considered and be an expected future revenue or cost.
Answer: TRUE
Diff: 2 Type: TF
Skill: Remember
Objective: LO 11-2
6) When choosing between two alternatives, costs that do not differ between the two alternatives can be considered to be irrelevant to that decision.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 11-2

7) All fixed costs are irrelevant in relevant-cost analysis.
Answer: FALSE
Explanation: Fixed costs that occur in the future or are different between alternatives are relevant.
Diff: 2 Type: TF
Skill: Understand
Objective: LO 11-2

8) All variable costs are relevant in relevant-cost analysis.
Answer: FALSE
Explanation: Fixed costs that occur in the future or are different between alternatives are relevant.
Diff: 2 Type: TF
Skill: Understand
Objective: LO 11-2

9) The last step in the decision process is normally to
A) evaluate and explain outcomes.
B) make assumptions and predictions.
C) choose alternatives.
D) perform quantitative analysis.
E) gather information.
Answer: A
Diff: 2 Type: MC
Skill: Understand
Objective: LO 11-2

10) The feedback obtained in the decision process cannot affect
A) future predictions.
B) the prediction method.
C) the decision model.
D) implementation.
E) past performance.
Answer: E
Diff: 2 Type: MC
Skill: Understand
Objective: LO 11-1