Question 1

Assume you are the owner of a video-rental store. Which of the following would be classified as a long-term decision?

Accepted Answer

Deciding whether to purchase a new building is a long-term decision as it involves a significant amount of investment and can have long-term implications on the business. The other options, such as purchasing inventory or cleaning supplies, or hiring an employee for the summer are short-term decisions that can be made more frequently and have a lesser impact on the overall business strategy.

Question 2

It is important to keep the time horizon in mind when making decisions because: a. Short term decisions are generally more costly than long term decisions.
B) We always want to identify choices quickly.
C) When making future decisions, costs incurred in the past must be considered.
D) The horizon affects whether a cost or benefit is controllable for the decision.
E) All of the above are important.

Accepted Answer

The answer of It is important to keep the time...

Question 3

Which of the following statements relating to relevance and controllability is not correct?

Accepted Answer

The answer of Which of the following statements relating to...

Question 4

Which of the following is the best example of a long-term capacity cost for a trucking company? a. Performing tune-ups on older trucks.
B) Installing a GPS unit in each truck to monitor efficient routes and fuel efficiency in order to serve more customers on a daily basis.
C) Changing the oil annually in each delivery truck.
D) Replacing torn seats in several of the trucks in which truckers have complained

Accepted Answer

The answer of Which of the following is the best...

Question 5

Which of the following best represents a controllable cost for a manufacturing plant? a. Reducing the number of pages in a product brochure.
B) Increasing the price of two of the best selling products.
C) Billing customers for delivery fuel surcharges.
D) Charging customers for additional production runs of a special ordered product.

Accepted Answer

The answer of Which of the following best represents a...

Question 6

Steve Johnson has decided to lease a vehicle as opposed to purchasing it. The lease agreement calls for a monthly payment of $400. Any mile driven above 1,000 per month will cost an additional $.10 per mile. If Steve drives 1,240 miles in the month of January his total cost will be: a. $400
B) $640
C) $524
D) $424

Accepted Answer

The answer of Steve Johnson has decided to lease a...

Question 7

The Rich Company leases its copier on an annual basis. The lease fee is $1,600 per year plus $.01 per copy for any copies made over 750,000. If the company made 800,000 copies in 2008, its total cost was: a. $1,600
B) $2,100
C) $2,400
D) $1,650

Accepted Answer

The answer of The Rich Company leases its copier on...

Question 8

Which one of the following best represents a controllable benefit for a manufacturing plant? a. Reduce the number of security guards during holiday periods.
B) Increasing the selling price of the company's best selling product by $1.00 per unit.
C) Reduce the medical benefit coverage for employees.
D) Eliminate one copy machine for the human resources department.

Accepted Answer

The answer of Which one of the following best represents...

Question 9

Which of the following is a not a correct statement? a. A decision maker's control over costs and benefits decrease as the time horizon increases.
B) A decision maker's control over costs increases as the time horizon increases.
C) A decision maker's control over benefits increases as the time horizon increases.
D) Both B and C are incorrect statements.

Accepted Answer

The answer of Which of the following is a not...

Question 10

Which one of the following is the best example of a long-term decision for management of a manufacturing company? a. Increasing the amount of caffeine in the company's soft drink products.
B) Eliminating excessive use of company supplies.
C) Building an assembly line for its energy drinks.
D) Removing manufacturing byproducts that are deemed hazardous for storage.

Accepted Answer

The answer of Which one of the following is the...

Question 11

Variable costs per unit are as follows: Raw materials $2.15
Direct labor $1.45
Fixed costs are $5,000 per month
If the company produces 4,000 units in the month of March their total costs will be:

Accepted Answer

Variable cost per unit = $2.15 + $1.45 = $3.60
Total variable cost for 4,000 units = $3.60 x 4,000 = $14,400
Total cost = Total fixed cost + Total variable cost
Total cost = $5,000 + $14,400 = $19,400

Question 12

Traceability is: a. The degree to which we can directly relate a cost or benefit to a specific option.
B) How activities influence costs and benefits.
C) The result of performing activities.
D) The difference across decision options.
E) None of the above.

Accepted Answer

The answer of Traceability is: a. The degree to which...

Question 13

A sunk cost is:

Accepted Answer

A sunk cost refers to a past expenditure that cannot be changed, regardless of any future actions or decisions. It is no longer relevant to decision making and should not be factored into future costs or benefits. Choices A, C, and D do not accurately describe a sunk cost.

Question 14

The owner of Mom & Pop's Hardware Store purchased a knife sharpener last year in order to allow the store to offer services in sharpening all types of blades. The cost of the equipment was $5,200 but Pop now feels that the store needs to generate additional revenue of $200 per month in order to have made the purchase worthwhile. With regard to making the decision of whether to continue to offer the service, the original cost of the sharpener can be considered: a. Controllable.
B) Mixed.
C) Sunk.
D) Relevant.

Accepted Answer

The answer of The owner of Mom & Pop's Hardware...

Question 15

The Criders Company has 12,000 units of obsolete inventory. The units originally cost $6,000. The company can either sell them for scrap at $.20 per unit or they can invest $2,000 to be able to sell them at a price of $.60 per unit. With regard to this decision, relevant costs or benefits include: a. $6,000 only.
B) $2,000 and $.20 per unit only.
C) $.20 per unit, $.60 per unit, and $2,000.
D) $2,000 and $6,000 only.

Accepted Answer

The answer of The Criders Company has 12,000 units of...

Question 16

Variability deals with: a. The degree to which we can directly relate a cost or benefit to a specific option.
B) How activities influence costs and benefits.
C) The result of performing activities.
D) The difference across decision options.
E) None of the above.

Accepted Answer

The answer of Variability deals with: a. The degree to...

Question 17

Relevant benefits are:

Accepted Answer

Relevant benefits are the ones that can be controlled and differ based on the decision options. Option B refers to sunk costs, which are not relevant to decision-making. Option C refers to fixed costs, which do not change with the changing volume of activity, but they may or may not be relevant depending on the decision being made. Option D is incorrect as variable costs may or may not create relevant benefits.

Question 18

A decision maker's control over costs and benefits:

Accepted Answer

The answer of A decision maker's control over costs and...

Question 19

Jason is going to play golf this afternoon and has to choose between two different golf courses. The greens fees to play each are both $18, the cart fees at each course is $9. One course, however, is located 20 miles further than the other. Therefore it would cost approximately an additional $4 in gas to play the course that is further away. Relevant costs total: a. $18
B) $27
C) $9
D) $4

Accepted Answer

The answer of Jason is going to play golf this...

Question 20

When making decisions, a general rule would be: a. Fixed costs are always relevant.
B) Variable (unit-level) costs are always irrelevant.
C) Future costs and revenues are always relevant.
D) Future costs and revenues which differ are always relevant.

Accepted Answer

The answer of When making decisions, a general rule would...

Quiz 2: Identification and Estimating Costs and Benefits

Assume you are the owner of a video-rental store. Which of the following would be classified as a long-term decision?

Which of the following statements relating to relevance and controllability is not correct?

The Rich Company leases its copier on an annual basis. The lease fee is $1,600 per year plus $.01 per copy for any copies made over 750,000. If the company made 800,000 copies in 2008, its total cost was: a. $1,600 B) $2,100 C) $2,400 D) $1,650

Variable costs per unit are as follows: Raw materials $2.15 Direct labor $1.45 Fixed costs are $5,000 per month If the company produces 4,000 units in the month of March their total costs will be:

Traceability is: a. The degree to which we can directly relate a cost or benefit to a specific option. B) How activities influence costs and benefits. C) The result of performing activities. D) The difference across decision options. E) None of the above.

A sunk cost is:

Variability deals with: a. The degree to which we can directly relate a cost or benefit to a specific option. B) How activities influence costs and benefits. C) The result of performing activities. D) The difference across decision options. E) None of the above.

Relevant benefits are:

A decision maker's control over costs and benefits:

When making decisions, a general rule would be: a. Fixed costs are always relevant. B) Variable (unit-level) costs are always irrelevant. C) Future costs and revenues are always relevant. D) Future costs and revenues which differ are always relevant.