This

**preview**has**blurred**sections. Sign up to view the full version! View Full DocumentCHAPTER 11:
DECISION MAKING AND RELEVANT INFORMATION
TRUE/FALSE
1.
A decision model is a formal method for making a choice, frequently involving both
quantitative and qualitative analyses.
Answer
:
True
Difficulty
:
1
Objective
:
1
2.
Feedback from previous decisions uses historical information and, therefore, is
irrelevant for making future predictions.
Answer
:
False
Difficulty
:
2
Objective
:
1
Historical costs may be helpful in making future predictions, but are not relevant costs
for decision making.
3.
The amount paid to purchase tools last month is an example of a sunk cost.
Answer
:
True
Difficulty
:
2
Objective
:
2
4.
For decision making, differential costs assist in choosing between alternatives.
Answer
:
True
Difficulty
:
1
Objective
:
2
5.
For a particular decision, differential revenues and differential costs are always
relevant.
Answer
:
True
Difficulty
:
1
Objective
:
2
6.
A cost may be relevant for one decision, but not relevant for a different decision.
Answer
:
True
Difficulty
:
2
Objective
:
2
7.
Revenues that remain the same for two alternatives being examined are relevant
revenues.
Answer
:
False
Difficulty
:
1
Objective
:
2
Revenues that remain the same between two alternatives are irrelevant for that decision
since they do not differ between alternatives.
8.
Sunk costs are past costs that are unavoidable.
Answer
:
True
Difficulty
:
1
Objective
:
2
9.
Quantitative factors are always expressed in numerical terms.
Answer
:
True
Difficulty
:
2
Objective
:
3
Chapter 11
Page 1

10.
Qualitative factors are outcomes that are measured in numerical terms, such as the costs
of direct labor.
Answer
:
False
Difficulty
:
1
Objective
:
3
Quantitative
factors are outcomes that are measured in numerical terms, such as the
costs of direct labor.
11.
If a manufacturer chooses to continue purchasing direct materials from a supplier
because of the ongoing relationship that has developed over the years, the decision is
based on qualitative factors.
Answer
:
True
Difficulty
:
2
Objective
:
3
12.
Relevant revenues and relevant costs are the only information managers need to select
among alternatives.
Answer
:
False
Difficulty
:
3
Objective
:
3
Qualitative factors, as well as relevant revenues and relevant costs need to be
considered when selecting among alternatives.
13.
Full costs of a product are relevant for one-time-only special order pricing decisions.
Answer
:
False
Difficulty
:
2
Objective
:
3
Incremental costs of a product are relevant for one-time-only special order pricing
decisions.
14.
Full costs of a product include variable costs, but not fixed costs.
Answer
:
False
Difficulty
:
1
Objective
:
3
Full costs of a product include variable and fixed costs for all business functions in the
value chain.
15.
For one-time-only special orders, variable costs may be relevant but not fixed costs.

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