chap011(3) - Chapter 011 Relevant Costs for Decision Making...

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Unformatted text preview: Chapter 011, Relevant Costs for Decision Making True / False Questions 1. Sunk costs are costs that have proven to be unproductive. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Medium 2. Sunk costs and future costs that do not differ between the alternatives are not relevant in a decision. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Easy 3. Consistency demands that a cost that is relevant in one decision be regarded as relevant in other decisions as well. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Medium 11-1 Chapter 011, Relevant Costs for Decision Making 4. A cost may be relevant for one decision making situation but irrelevant for another situation. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Easy 5. A future cost that does not vary among alternatives under consideration is irrelevant. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Easy 6. Opportunity costs represent economic benefits that are forgone as a result of pursuing some course of action. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Easy 7. An existing asset should not be replaced until its original cost has been fully recovered. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 1 Level: Medium 11-2 Chapter 011, Relevant Costs for Decision Making 8. Fixed costs are irrelevant in decisions about whether a product line should be dropped. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 2 Level: Easy 9. In a special order situation, any fixed cost associated with the order would be irrelevant. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 4 Level: Medium 10. When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the highest contribution margin per unit of the constrained resource. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making AICPA FN: Reporting Learning Objective: 5 Level: Easy 11. Eliminating nonproductive time is particularly important in a bottleneck operation....
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chap011(3) - Chapter 011 Relevant Costs for Decision Making...

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