multiple choice - chapter 10 Flashcards
Which of the following is NOT one of the steps in the managerial decision-making process?
A) basing decisions on sunk costs
B) defining business goals
C) identifying alternative courses of action
D) gathering and analyzing relevant information
A
Costs that do not differ between alternatives are ________.
A) relevant to the decision
B) considered opportunity costs
C) considered irrelevant to the decision
D) important only if they represent a material dollar amount
C
When replacing an old asset with a new one, the original purchase price of the old asset represents a(n) ________ cost.
A) relevant
B) differential
C) opportunity
D) sunk
Answer: D
Which of following statements is true of short-term decision making?
A) Fixed costs and variable costs must be analyzed separately.
B) All costs behave in the same way.
C) Unit manufacturing costs are variable costs.
D) All costs involved in a decision are considered relevant.
Answer: A
If a company wants to be a price-taker, which of the following strategies should be taken?
A) Enter a competitive market and focus on cost cutting.
B) Produce a unique product.
C) Exploit the value of a fashionable brand name.
D) Differentiate the product clearly from the competitors.
Answer: A
Which of the following statements is true?
A) Companies are price-takers when their products are unique.
B) Companies are price-setters for a product when there is intense competition.
C) Companies are price-takers for a product when the pricing approach emphasizes cost-plus pricing.
D) Companies are price-takers when they have little or no control over the prices of their products or services.
D
Which of the following statements describes a scenario when management should consider dropping a business division?
A) The division has been consistently reporting an operating loss.
B) The division’s avoidable fixed costs are less than its contribution margin.
C) The division’s avoidable fixed costs are greater than its contribution margin.
D) The division’s unavoidable fixed costs are greater than its operating loss.
Answer: C
________ refer to the value forgone in order to make one particular investment instead of another.
A. Opportunity costs
B. Sunk costs
C. Relevant costs
D. Irrelevant costs
Answer: A
In deciding whether to drop its electronics product line, a company’s manager should ignore ________.
A) the variable and fixed costs it could save by
dropping the product line
B) the revenues it would lose from dropping the product line
C) the effect of dropping the electronics product line on the sales of its other products
D) the amount of unavoidable fixed costs
Answer: D
An opportunity cost is ________.
A) the cost incurred to gain the opportunity to make a sale
B) the benefit gained by choosing a certain course of action
C) the benefit given up by choosing an alternative course of action
D) costs that have been incurred in the past
Answer: C
