ACC 560 Week 6 Quiz – Strayer NEW

Week 6 Quiz 5: Chapters 7 and 8

 

Chapter 7

TRUE-FALSE STATEMENTS

    1.     An important step in management's decision-making process is to determine and evaluate possible courses of action.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Strategic Planning

 

    2.     In making decisions, management ordinarily considers both financial and nonfinancial information.

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Strategic Planning

 

    3.     In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain constant.

 

Ans:, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Quantitative Methods

 

    4.     Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Interaction, IMA: Decision Analysis

 

    5.     Decision-making involves choosing among alternative courses of action.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

    6.     Financial data are developed for a course of action under an incremental basis and then it is compared to data developed under a differential basis before a decision is made.

 

Ans:, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

    7.     In incremental analysis, total fixed costs will always remain constant under alternative courses of action.

 

Ans:, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Decision Analysis

 

    8.     A special one-time order should never be accepted if the unit sales price is less than the unit variable cost.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

    9.     If a company has excess capacity and present markets will not be affected, it would be profitable to accept an order at a special unit price even though the price is less than the unit variable cost to manufacture the item.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  10.     A company should never accept an order for its product at less than its regular sales price.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  11.     If a company is operating at less than capacity, the incremental costs of a special order will likely include variable manufacturing costs, but not fixed costs.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  12.     An incremental make-or-buy decision depends solely on which alternative is the lowest cost alternative.

 

Ans:, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  13.     A decision whether to continue to make a product or buy it externally depends on the external price and the amount of variable and fixed costs that can be eliminated assuming no alternative uses of resources.

 

Ans:, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Quantitative Methods

 

  14.     An opportunity cost is the potential benefit obtained by using resources in an alternative course of action.

 

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  15.     If an incremental make or buy analysis indicates that it is cheaper to buy rather than make an item, management should always make the decision to choose the lowest cost alternative.

 

Ans:, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  16.     In a sell or process further decision, management should process further as long as the incremental revenues from additional processing exceed the incremental variable costs.

 

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  17.     It is always better to sell now rather than process further because of the time value of money.

 

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  18.     The basic decision rule in a sell or process further decision is: process further if the incremental revenue from processing exceeds the incremental processing costs.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  19.     In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered an opportunity cost.

 

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  20.     In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

 

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  21.     In a decision to retain or replace old equipment, the salvage value of the old equipment is relevant in incremental analysis.

 

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  22.     It is better not to replace old equipment if it is not fully depreciated.

 

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

 

  23.     From a quantitative standpoint, a segment should be eliminated if its contribution margin is less than the fixed costs that can be eliminated.

 

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

 

  24.     The elimination of an unprofitable product line may adversely affect the remaining product lines.

 

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics

 

  25.     Many of the decisions involving incremental analysis have qualitative features, but since they are not easily measured they should be ignored.

 

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics

 

  26.     Accounting contributes to management's decision-making process through internal reports that review the actual impact of the decision.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  27.     The process used to identify the financial data that change under alternative courses of action is called allocation of limited resources.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  28.     If a company is operating at full capacity, the incremental costs of a special order will likely include fixed manufacturing costs.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics

 

  29.     The basic decision rule in a sell or process further decision is:  sell without further processing as long as the incremental revenue from processing exceeds the incremental processing costs.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  30.     In deciding on the future status of an unprofitable segment, management should recognize that net income could decrease by eliminating the unprofitable segment.

 

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

MULTIPLE CHOICE QUESTIONS

 

  31.     A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

a.   assign responsibility for the decision.

b.   provide relevant revenue and cost data about each course of action.

c.   determine the amount of money that should be spent on a project.

d.   decide which actions that management should consider.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  32.     Which of the following stages of the management decision-making process is improperly sequenced?

a.   Evaluate possible courses of action  Make decision.

b.   Assign responsibility for the decision  Identify the problem.

c.   Identify the problem  Determine possible courses of action.

d.   Assign responsibility for decision  Determine possible courses of action.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  33.     Internal reports that review the actual impact of decisions are prepared by

a.   department heads.

b.   the controller.

c.   management accountants.

d.   factory workers.

 

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Performance Measurement

 

  34.     Which of the following steps in the management decision-making process does not generally involve the managerial accountant?

a.   Determine possible courses of action

b.   Make the appropriate decision based on relevant data

c.   Prepare internal reports that review the impact of decisions

d.   None of these

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  35.     Which is the first step in the management decision-making process?

a.   Determine and evaluate possible courses of action.

b.   Review results of the decision.

c.   Identify the problem and assign responsibility.

d.   Make a decision.

 

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  36.     Which of the following will always be a relevant cost?

a.   Sunk cost

b.   Fixed cost

c.   Variable cost

d.   Opportunity cost

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

 

  37.     Costs that will differ between alternatives and influence the outcome of a decision are

a.   sunk costs.

b.   unavoidable costs.

c.   relevant costs.

d.   product costs.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  38.     A revenue that differs between alternatives and makes a difference in decision-making is called a(n)

a.   sales revenue.

b.   incremental revenue.

c.   unavoidable revenue.

d.   irrelevant revenue.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  39.     Alvarez Company is considering the following alternatives:

                                           Alternative A          Alternative B

Revenues                    $50,000                 $60,000

Variable costs               30,000                   30,000

Fixed costs                   10,000                   16,000

What is the incremental profit?

a.   $10,000

b.   $0

c.   $6,000

d.   $4,000

 

Ans: LO: 2, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  40.     Which of the following is an irrelevant cost?

a.   An avoidable cost

b.   An incremental cost

c.   A sunk cost

d.   An opportunity cost

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  41.     Relevant costs are always

a.   fixed costs.

b.   variable costs.

c.   avoidable costs.

d.   sunk costs.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  42.     The process of evaluating financial data that change under alternative courses of action is called

a.   double entry analysis.

b.   contribution margin analysis.

c.   incremental analysis.

d.   cost-benefit analysis.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Risk Analysis, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  43.     Nonfinancial information that management might evaluate in making a decision would not include

a.   employee turnover.

b.   contribution margin.

c.   the environment.

d.   the corporate profile in the community.

 

Ans:, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics

 

  44.     Incremental analysis is synonymous with

a.   difficult analysis.

b.   differential analysis.

c.   gross profit analysis.

d.   derivative analysis.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  45.     In incremental analysis,

a.   only costs are analyzed.

b.   only revenues are analyzed.

c.   both costs and revenues may be analyzed.

d.   both costs and revenues that stay the same between alternate courses of action will be analyzed.

 

Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  46.     Incremental analysis is most useful

a.   in developing relevant information for management decisions.

b.   in choosing between capital budgeting methods.

c.   in evaluating the master budget.

d.   as a replacement technique for variance analysis.

 

Ans:LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

  47.     The source of data to serve as inputs in incremental analysis is generated by

a.   market analysts.

b.   engineers.

c.   accountants.

d.   all of these.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Information Management

 

  48.     Which of the following is not a true statement?

a.   Incremental analysis might also be referred to as differential analysis.

b.   Incremental analysis is the same as CVP analysis.

c.   Incremental analysis is useful in making decisions.

d.   Incremental analysis focuses on decisions that involve a choice among alternative courses of action.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Decision Analysis

 

Continued................

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ACC 560 Week 6 Quiz – Strayer NEW

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