Question 1

The managerial accountant's primary role in the decision-making process is to decide what information is relevant to the problem and provide timely and accurate data.

Accepted Answer

The managerial accountant's role involves identifying relevant information and ensuring it is accurate and timely to aid in decision-making, rather than making the decisions themselves.

Question 2

The process of identifying relevant costs and benefits is largely the same whether the decision is viewed from a short-run or long-run perspective.

Accepted Answer

The process of identifying relevant costs and benefits is the same regardless of the time frame of the decision.

Question 3

In most all decisions, joint costs are relevant costs.

Accepted Answer

Joint costs are sunk costs and are not relevant to decision-making because they do not change with the decision at hand.

Question 4

The first step in the decision-making process is to identify the alternatives.

Accepted Answer

The first step in the decision-making process is to identify the problem or opportunity, not the alternatives. Identifying alternatives comes after understanding the problem.

Question 5

Cost predictions relevant to repetitive decisions typically can draw on a large amount of historical data.

Accepted Answer

Repetitive decisions often generate a significant amount of historical data over time, which can be analyzed to make accurate cost predictions for similar future decisions.

Question 6

The axes and constraints form an area for the solution to a linear program called the relevant region.

Accepted Answer

The correct term for the area formed by the axes and constraints in a linear programming problem is the "feasible region" or "feasible solution space," not the "relevant region."

Question 7

A firm that decides to emphasize those goods with the highest contribution margin per unit may have made an incorrect decision when the company has capacity constraints in the form of limited resources.

Accepted Answer

Focusing solely on goods with the highest contribution margin per unit ignores the potential bottleneck created by limited resources or capacity constraints, which could lead to suboptimal allocation of resources and reduced overall profitability.

Question 8

Under activity-based costing, the concepts underlying relevant-costing analysis are not valid because they may derive conclusions that are different than those obtained with conventional cost analyses.

Accepted Answer

Activity-based costing (ABC) and relevant-costing analysis are both valid approaches; they simply focus on different aspects of costing. ABC allocates overhead costs based on activities that drive costs, while relevant-costing focuses on costs that will change as a result of a decision. Both can be used to derive accurate and useful financial information for decision-making.

Question 9

An accounting information system should be designed to provide information that is useful. To be useful the information must be:

Accepted Answer

Relevant, accurate, and timely information is essential for decision-making in accounting. It ensures that users of the information can rely on it to make informed decisions, reflecting the primary purpose of an accounting information system.

Question 10

The last step in the decision-making process is to collect the data.

Accepted Answer

The last step in the decision-making process is typically to evaluate the effectiveness of the decision, not to collect the data. Data collection usually occurs earlier in the process.

Question 11

The City of Columbus should not consider the purchase price of its old vehicle when making the decision to replace it with a more cost effective new vehicle.

Accepted Answer

The purchase price of the old vehicle is a sunk cost and should not influence the decision to replace it, as it cannot be recovered and does not affect future costs or benefits.

Question 12

Managerial accountants:

Accepted Answer

Managerial accountants play a crucial role in collecting data and providing the necessary information for decision-making within an organization. They are also often involved as members of cross-functional teams, contributing to a wide range of decisions beyond just accounting matters. This role is integral to the strategic planning and operational efficiency of a company, making their involvement in decision-making activities and cross-functional teams essential.

Question 13

Dubin Company is operating at capacity and wants to add a new service to its expanding business. The new service should be added as long as service revenues exceed the sum of variable costs and fixed costs.

Accepted Answer

The decision to add a new service should be based on whether the incremental revenues exceed the incremental costs, not just if service revenues exceed the sum of variable and fixed costs. This is because fixed costs may not increase if the company is already operating at capacity.

Question 14

At which step or steps in the decision-making process do qualitative considerations generally have the greatest impact?

Accepted Answer

Qualitative considerations often have the greatest impact when making a decision, as they involve subjective judgments and factors that are not easily quantified, such as company culture, employee morale, or customer satisfaction.

Question 15

In the final analysis of a decision, quantitative measures are more important than qualitative measures.

Accepted Answer

Both quantitative and qualitative measures are important in the final analysis of a decision as they offer different insights; quantitative measures provide numerical data, while qualitative measures offer context and depth to understand the full impact of the decision.

Question 16

The term "opportunity cost" is best defined as the benefit associated with a rejected alternative when making a choice.

Accepted Answer

Opportunity cost refers to the benefit that is missed or given up when choosing one alternative over another.

Question 17

Opportunity cost is not important in special order decisions.

Accepted Answer

Opportunity cost is important in special order decisions because it represents the potential benefits an organization misses out on when choosing one alternative over another.

Question 18

The concept of a relevant cost can be defined as a past cost that differs among alternatives.

Accepted Answer

A relevant cost is a future cost that differs among alternatives. Past costs, also known as sunk costs, are not considered relevant because they have already been incurred and cannot be changed by any current or future action.

Question 19

Factors in a decision problem that cannot be expressed in numerical terms are:

Accepted Answer

Factors that cannot be expressed in numerical terms are qualitative in nature, as they are based on qualities or characteristics rather than numbers or quantities.

Question 20

Linear programming is used for writing code, but not for product mix problems.

Accepted Answer

Linear programming is a mathematical modeling technique used for optimization, including solving product mix problems, not for writing code.

Quiz 14: Decision Making: Relevant Costs and Benefits