Chapter 11 Test Bank

Chapter 11 Test Bank - DECISION MAKING AND RELEVANT...

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DECISION MAKING AND RELEVANT INFORMATION By :Dr. Suyanto, SE, MM, M.Ak Email : [email protected] 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 Terms to Learn : decision model, quantitative factors, qualitative factors 2. Feedback from previous decisions uses historical information and, therefore, is irrelevant for making future predictions. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : relevant costs 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 Terms to Learn : sunk costs 4. For decision making, differential costs assist in choosing between alternatives. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : differential cost 5. For a particular decision, differential revenues and differential costs are always relevant. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : differential cost, differential revenue 6. A cost may be relevant for one decision, but not relevant for a different decision. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : relevant costs 11-1
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7. Revenues that remain the same for two alternatives being examined are relevant revenues. Answer : False Difficulty : 1 Objective : 2 Terms to Learn : relevant revenues 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 Terms to Learn : sunk costs 9. The cost of a machine purchased last year will be irrelevant in a decision for next year. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : sunk costs, relevant costs 10. A sunk cost can never be relevant. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : sunk costs, relevant costs 11. Quantitative factors are always expressed in numerical terms. Answer : True Difficulty : 2 Objective : 3 Terms to Learn : quantitative factors 12. Qualitative factors are outcomes that are measured in numerical terms, such as the costs of direct labor. Answer : False Difficulty : 1 Objective : 3 Terms to Learn : qualitative factors Quantitative factors are outcomes that are measured in numerical terms, such as the costs of direct labor. 13. 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 Terms to Learn : qualitative factors 11-2
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14. Relevant revenues and relevant costs are the only information managers need to select among alternatives.
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