Question 1

________ becomes a principal source of feedback.
A) Prediction method
B) Decision model
C) Implementation
D) Evaluation of performance

Accepted Answer

Evaluation of performance provides feedback on how well a task or project was executed, which can be used to improve future performance.

Question 2

Under the absorption approach to pricing, the decision-maker has no direct knowledge of cost-volume-profit relationships.

Accepted Answer

The absorption approach focuses on covering all costs, including fixed and variable, in the pricing strategy, without necessarily analyzing the cost-volume-profit relationships directly.

Question 3

The predicted future costs and revenues that will differ among alternative courses of action are referred to as
A) relevant information.
B) sunk costs and revenues.
C) historical information.
D) predictable information.

Accepted Answer

Relevant information refers to costs and revenues that will differ among alternative courses of action and are therefore important in decision-making. Sunk costs and revenues are irrelevant in decision-making because they are already incurred and cannot be changed. Historical information may or may not be relevant, depending on whether it is still applicable to the current situation. Predictable information is not a term commonly used in decision-making.

Question 4

Predatory pricing is the act of charging different prices to different customers for the same product or service.

Accepted Answer

Predatory pricing involves setting prices extremely low to eliminate competition, not charging different prices to different customers.

Question 5

Unit costs are useful for predicting fixed costs, while total costs are useful for predicting variable costs.

Accepted Answer

Unit costs refer to the cost per unit of output, which includes both fixed and variable costs. Total costs refer to the overall cost of producing a certain level of output, which includes both fixed and variable costs. Therefore, neither unit costs nor total costs are specifically useful for predicting either fixed or variable costs.

Question 6

The predicted future costs and revenues that will differ as a result of alternative courses of actions are referred to as relevant information.

Accepted Answer

Relevant information refers to data that is significant in making a decision, and future costs and revenues that will vary as a result of different options are examples of relevant information.

Question 7

Unavoidable costs will not continue if an ongoing operation is changed or deleted.

Accepted Answer

Unavoidable costs are those that will continue regardless of changes to or the deletion of an operation, as they are fixed or committed costs.

Question 8

A decision model is any method for making a choice, sometimes requiring elaborate qualitative procedures.

Accepted Answer

A decision model can involve both qualitative and quantitative procedures to make a choice.

Question 9

In using the four popular markup formulas for pricing, the decision-maker will get four different target prices and will pick the best one for the product.

Accepted Answer

The answer of In using the four popular markup formulas...

Question 10

A fixed cost element of an identical amount that is common among all alternatives is essentially irrelevant.

Accepted Answer

Fixed costs are not affected by changes in the level of activity. Therefore, the fixed cost element remains the same regardless of the alternative chosen, making it irrelevant in the decision-making process.

Question 11

The accountant's role in decision making involves collecting the relevant information and ultimately making the final choice.

Accepted Answer

While the accountant's expertise in financial information is crucial to the decision-making process, they typically do not make the final choice. Instead, they provide insights and recommendations to business leaders who make the final decision.

Question 12

If small price increases cause large volume declines, demand is inelastic.

Accepted Answer

If small price increases cause large volume declines, demand is elastic. Inelastic demand means that quantity demanded does not significantly change in response to changes in price.

Question 13

In the short run, the minimum price to be quoted for a product should be equal to the costs that may be avoided by not landing the order.

Accepted Answer

In the short run, the minimum price should cover the variable costs and any other costs that can be avoided if the order is not accepted, ensuring no additional loss is incurred.

Question 14

In decision making, the key question is:
A) What are the fixed costs of each alternative?
B) What are the past costs of each alternative?
C) What difference will the choice make?
D) What are the irrelevant costs?

Accepted Answer

The key question in decision making is to analyze the difference that will be created by each alternative. By analyzing the difference, the decision-maker can understand which alternative will have the most positive impact and select the best choice accordingly. Therefore, option C is the most appropriate answer.

Question 15

In analyzing costs to decide whether to accept a special order, total fixed costs should be investigated to see how much fixed manufacturing costs per unit will be changed by the special order.

Accepted Answer

Fixed costs do not change with the level of production, so they are not relevant when analyzing a special order. Only variable costs and any additional fixed costs directly attributable to the order should be considered.

Question 16

Marginal cost is the additional cost resulting from producing and selling one additional unit.

Accepted Answer

Marginal cost refers to the cost incurred in producing an additional unit of a product. It is calculated by dividing the change in total cost by the change in the quantity produced.

Question 17

The accountant's primary role in the decision-making process is to
A) make the decision.
B) collect relevant information.
C) report irrelevant information.
D) provide emotional support.

Accepted Answer

The accountant's primary role in the decision-making process is to collect relevant information. This information is used by decision-makers to make informed decisions. The accountant's expertise in financial reporting and analysis is vital in ensuring that reliable and relevant information is collected and presented for decision-making.

Question 18

Limiting factors include labour-hours and machine-hours that limit production and hence sales in manufacturing firms.

Accepted Answer

Limiting factors refer to factors such as labour-hours and machine-hours that limit production and ultimately affect sales in manufacturing firms. This statement is, therefore, true.

Question 19

________ is (are) defined as any method for making a choice.
A) A decision model
B) Irrelevant costs
C) Relevant costs
D) Prediction method

Accepted Answer

A decision model is a tool or framework used to help make choices, which can include techniques like cost-benefit analysis, decision trees, or linear programming. The other options provided (irrelevant costs, relevant costs, and prediction methods) are not comprehensive methods for making a choice, but rather specific concepts related to decision-making.

Question 20

The contribution margin approach helps managers in pricing decisions because the relationships among variable costs, fixed costs and selling price changes are easier to show and understand.

Accepted Answer

The contribution margin approach shows the amount by which revenue exceeds variable costs and how much is left over to contribute towards covering fixed costs and profit. This makes it easier for managers to analyze the impact of changes in variable costs, fixed costs, and selling price on profit margins and make informed pricing decisions that can increase profitability.

Quiz 8: Relevant Information and Decision Making: Marketing Decisions

________ becomes a principal source of feedback.