A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to
provide relevant revenue and cost data about each course of action.
Which of the following will always be a relevant cost?
Opportunity Cost
Which of the following is an irrelevant cost?
A sunk cost
Nonfinancial information that management might evaluate in making a decision would not include
contribution margin
Incremental analysis would not be appropriate for
analysis of manufacturing variances.
In incremental analysis,
all costs are relevant if they change between alternatives.
If a company anticipates that other sales will be affected by the acceptance of a special order, then
lost sales should not be considered in the incremental analysis.
Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?
Both variable and fixed costs will be relevant.
Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?
Consider the opportunity cost of lost sales in the incremental analysis.
in the analysis concerning the acceptance or rejection of a special order, which items are relevant?
Variable costs and avoidable costs.
In a make-or-buy decision, which costs can be considered relevant?
Incremental variable costs, incremental fixed costs, and opportunity costs.
Which statement is true concerning the decision rule on whether to make or buy?
The company should buy if the cost of buying is less than the cost of producing.
Which decision will involve no incremental revenues?
Make or buy decision
Opportunity cost is usually
a potential benefit.
The decision rule on whether to sell or process further
is process further if incremental revenue from such processing exceeds the incremental processing costs.
The focus of a sell or process further decision is
both incremental revenue and incremental cost.
All of the following are relevant to the sell or process further decision except
costs incurred before the split-off point.
The point in the production process when joint products are readily identifiable is the
split-off point
When deciding whether or not to replace old equipment with new equipment, the overriding consideration is the
difference between future cost savings and the new equipment's costs.
Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment?
The salvage value of the old equipment
A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis?
Book value of the old equipment
The cash disposal value of old equipment is considered to be a
relevant cost
A company is deciding on whether to replace some old equipment with new equipment. Which of the following is not a relevant cost for incremental analysis?
Accumulated depreciation of the old equipment
In a retain or replace equipment decision, trade-in allowance available on old equipment
is relevant because it will not be realized if the old equipment is retained.
What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?
Net income will decrease.
A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If a product line is discontinued,
the contribution margin of the product line will indicate the net income increase or decrease.
The potential effects of the decision to eliminate a line of business on existing employees and the community are
qualitative factors
Accounting's contribution to the decision-making process occurs in all of the following steps except to
identify the problem and assign responsibility
In a make-or-buy decision, opportunity costs are
added to make the total cost.
If an unprofitable segment is eliminated,
variable expenses of the eliminated segment will be eliminated.
Why are budgets useful in the planning process?
They help communicate goas and provide a basis for evaluation.
Budgeting is usually most closely associated with which management function?
Planning
If budgets are to be effective, all of the following must be present except
Stockholder's approval of the budget.
Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?
Department managers should only be held accountable for controllable variances for their department.
A budget period should be
long enough to provide an obtainable goal under normal business conditions.
The budget committee would not normally include the
external auditor
Which of the following is not a proper match-up?
Budgeting<->Long-term goals
The direct materials and direct labor budgets provide information for preparing the
cash budget
The financial budgets include the
cash budget and the budgeted balance sheet.
In a production budget, total required production units are budgeted sales units plus
desired finished goods units minus beginning finished goods units.
Which of the following expenses would not appear on a selling and administrative expense budget?
Indirect labor
Which of the following would not appear as a fixed expense on a selling and administrative expense budget?
Freight-out
Which one of the following is not needed in preparing a production budget?
Budgeted raw materials
Of the following items, which one is not obtained from an individual operating budget?
Accounts receivable
The single most important output in preparing financial budgets is the
Cash budget
The projection of financial position at the end of the budget period is found on the
budgeted balance sheet
The cash budget reflects
expected cash receipts and cash disbursements from all sources.
Which one of the following sections would not appear on a cash budget?
Investing
Which one the following items would never appear on a cash budget?
Depreciation expense
Which of the following budgets would be prepared for a manufacturer but not for a merchandiser?
Direct labor budget
Budgeting in not-for-profit organizations
usually starts with budgeting expenditures, rather than receipts.
An appropriate activity index for a college or university for budgeting faculty positions would be the
Credit hours taught by a department.
Coordinating the preparation of the budget is the responsibility of the
budget committee
The important end-product of the operating budgets is the
budgeted income statement
The budget that is often considered to be the most important financial budget is the
cash budget
A purchases budget is used instead of a production budget by
merchandising companies
Which of the following statements is incorrect?
The production budget is derived from the direct materials and direct labor budgets.
Accounting generally has the responsibility for
expressing the budget in financial terms
It is important that budgets be accepted by
a) division managers
b) department heads
c) supervisors
d) ALL OF THE ABOVE
Budget development for the coming year usually starts
several months before the end of the current year.