Chapter 13 - Chapter 13 Relevant Costs for Decision Making...

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Chapter 13 Relevant Costs for Decision Making Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 13-5 True/False Questions 1. Sunk costs are costs that have proven to be unproductive. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Medium 2. All costs are avoidable in a decision except sunk costs and future costs that do not differ between the alternatives at hand. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Easy 3. Consistency demands that a cost that is relevant in one decision be regarded as relevant in other decisions as well. Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Medium 4. A cost may be relevant for one decision making situation but irrelevant for another situation. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Easy 5. A future cost that does not vary among alternatives under consideration is irrelevant. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Easy 6. Opportunity costs represent economic benefits that are forgone as a result of pursuing some course of action. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Easy 7. An existing asset should not be replaced until its original cost has been fully recovered. Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 1 Level: Medium
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Chapter 13 Relevant Costs for Decision Making 13-6 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 8. Fixed costs are irrelevant in decisions about whether a product line should be dropped. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 2 Level: Easy 9. In a special order situation, any fixed cost associated with the order would be irrelevant. Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 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. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 5 Level: Easy 11. Eliminating nonproductive time is particularly important in a bottleneck operation. Ans: True AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making; Reporting LO: 5 Level: Medium 12. One way to increase the effective utilization of a bottleneck is to reduce the number of defective units.
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