chp 8 test bank - CHAPTER 8COST ANALYSIS AND ESTIMATION...

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CHAPTER 8—COST ANALYSIS AND ESTIMATION MULTIPLE CHOICE 1. The foregone value associated with the current rather than next-best use of a given asset is called: a. current cost. b. replacement cost. c. historical cost. d. opportunity cost. ANS: D 2. Sunk costs: a. typically involve multiple units of output. b. do not vary across decision alternatives. c. come into play when judging the costs of adding a new product line, advertising cam- paign, production shift, or organization structure. d. play a role in determining the optimal course of action. ANS: B 3. In the short run, the: a. firm has complete flexibility with respect to input use. b. availability of all inputs is fixed. c. operating period is longer than the planning period. d. availability of at least one input is fixed. ANS: D 4. In the long run, the: a. availability of at least one input is fixed. b. firm's operating decisions are typically constrained by prior capital expenditures. c. availability of all but one input is fixed. d. firm has complete flexibility with respect to input use. ANS: D 5. The amount that must be paid for an item under prevailing market conditions is: a. historical cost. b. replacement cost. c. incremental cost. d. current cost. ANS: D 6. The acquisition cost of an asset is: a. a replacement cost. b. an implicit cost. c. an explicit cost. d. an opportunity cost. ANS: B 7. Incremental cost is the change in:
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a. total cost caused by a given managerial decision. b. noncash expenses caused by a given managerial decision. c. out-of-pocket costs caused by a given managerial decision. d. variable cost caused by a given managerial decision. ANS: A 8. Noncash expenses are: a. explicit costs. b. sunk costs. c. incremental costs. d. implicit costs. ANS: D 9. In the decision process, management should ignore: a. implicit costs. b. historical costs. c. sunk costs. d. incremental costs. ANS: C 10. In the decision process, management should always consider: a. relevant costs. b. sunk costs. c. implicit costs only. d. historical costs. ANS: A 11. Fixed costs include: a. variable labor expenses. b. output-related energy costs. c. output-related raw material costs. d. variable interest costs for borrowed capital. ANS: D 12. Marginal cost equals: a. average variable cost at its maximum point. b. the change in total fixed cost divided by the change in quantity. c. the change in total variable cost divided by the change in quantity. d. total cost divided by quantity. ANS: C 13. Incremental cost: a. always equals marginal cost. b. never involves multiple outs. c. is the added cost tied to a given managerial decision. d. is typically less than historical cost. ANS: C 14. If the productivity of variable factors is decreasing in the short-run:
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a. marginal cost must increase as output increases. b.
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chp 8 test bank - CHAPTER 8COST ANALYSIS AND ESTIMATION...

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