Question 1

Sunk costs,unitizing costs,how costs are allocated,and leaving out opportunity costs are all factors where errors are often made,and will ultimately affect the outcome of the decision.

Accepted Answer

Sunk costs are irrelevant to current decision-making, unitizing costs can be misleading if items are not uniform, incorrect allocation of costs can result in an inaccurate picture of cost structure, and not considering opportunity costs can lead to missed opportunities or inefficient decision-making. All of these factors can lead to errors in decision-making and affect the outcome.

Question 2

Which of the following statements in relation to making tactical decisions is incorrect?

Accepted Answer

Future costs are not always relevant; only incremental future costs that differ between alternatives are relevant for tactical decision-making. Sunk costs, allocated and unitized fixed costs are generally irrelevant, and opportunity costs are relevant when there is no excess capacity, making the other statements correct.

Question 3

When making decisions,the quantitative information considered consists of factors relevant to the decision that cannot be expressed effectively in numerical terms.

Accepted Answer

Quantitative information refers to data that can be expressed in numerical terms and is used for analysis in decision-making, whereas qualitative information consists of factors that cannot be effectively expressed in numerical terms.

Question 4

Sleepo Ltd has been manufacturing only one type of alarm clock,the PlainSnooze model.The company is considering developing some modifications to make another,more advanced model.Two options are available: the ToughSnooze and the MusicSnooze.Both ToughSnooze and MusicSnooze will start with the same processes as the PlainSnooze model,but with additional advanced functions.ToughSnooze has a voice activated snooze function,as well as an 'indestructible' aluminium casing,created for people who throw their alarm clocks around.The MusicSnooze also has a voice activated snooze function,but instead of the tough aluminium casing,it has a 'music choice' function.In choosing between making the ToughSnooze or the MusicSnooze,which of the following costs are relevant?
I The cost of building the PlainSnooze model
Ii)The cost of building a voice activated snooze function.iii The cost of building an "indestructible" aluminium cover.iv The cost of building "music choice" function.

Accepted Answer

The answer of Sleepo Ltd has been manufacturing only one...

Question 5

Efficient decision-making tends to consider relevant information only and this information focuses on incremental revenue and expenses.

Accepted Answer

Efficient decision-making involves analyzing and considering only relevant information, which is typically focused on incremental revenue and expenses. This approach avoids being bogged down by irrelevant data and helps to identify the most profitable course of action.

Question 6

The split-off point is that stage in the manufacturing process where the products being manufactured can finally be identified as separate products.

Accepted Answer

The split-off point is indeed the point in the manufacturing process where the products can be identified as separate products.

Question 7

The very nature of tactical decisions means that in many situations most overhead costs are considered fixed and may not be relevant to the decision in hand.

Accepted Answer

Tactical decisions are short-term decisions made by middle-level management, and are focused on achieving specific goals or targets. These decisions usually involve making changes in the operational processes or resources in order to improve efficiency or effectiveness. In many cases, the overhead costs, such as rent, salaries, and utilities, are considered fixed and cannot be easily changed in the short-term. Therefore, these costs may not be relevant to the tactical decision in hand.

Question 8

Which of the following is not a characteristic of a tactical decision?

Accepted Answer

Tactical decisions are typically medium-term, operational decisions that are easier to reverse compared to strategic decisions. They focus on the effective and efficient allocation of resources to achieve strategic objectives, without necessarily altering the company's capacity or long-term direction.

Question 9

When a department or a product is showing a loss after all costs have been traced and allocated,a company has no option but to make the decision to either close the department or drop the product.

Accepted Answer

The decision to close a department or drop a product involves considering not just the direct costs but also the contribution margin, potential for future growth, strategic importance, and how fixed costs allocated to the department or product would be absorbed by other parts of the business.

Question 10

Which of the following is least likely to be classified as a tactical decision?

Accepted Answer

Tactical decisions are short-term, specific and focused on achieving specific objectives, such as improving efficiency or productivity, reducing costs or enhancing customer satisfaction. Buying a new factory is typically a strategic decision, as it involves significant investment and has long-term implications for the organization's overall direction and competitive position. The other options (B, C, and D) involve specific actions aimed at achieving short-term goals and are more likely to be considered tactical decisions.

Question 11

When deciding whether to accept a special order,spare or idle capacity is not a factor that needs to be taken into account.

Accepted Answer

Spare or idle capacity should definitely be considered when deciding whether to accept a special order. If there is idle capacity, then accepting a special order may generate greater profits than leaving the capacity unused. However, if there is no idle capacity, accepting a special order may lead to additional production costs and lower profit margins.

Question 12

While there is a decision-making model,in many instances managers frequently make decisions without necessarily following the set steps detailed in the model.

Accepted Answer

Managers often make decisions based on their intuition, experience, and the urgency of the situation, which may not necessarily follow a set decision-making model.

Question 13

North Central Publishing is considering outsourcing its printing process.Which of the following are relevant for this outsourcing decision?
I The rent associated with the free-up space when the printing equipment is sold
Ii supplier's financial stability
Iii the carrying amount of the printing equipment

Accepted Answer

I is not relevant to the outsourcing decision as it is only a factor associated with selling the printing equipment, not outsourcing the printing process.

II is relevant as the financial stability of the chosen supplier will impact the reliability and quality of the outsourced printing process.

III is also relevant as it represents the value of the printing equipment that will be sold if the printing process is outsourced.

Question 14

When making the decision of whether to process further a joint product,it is generally better to allocate the joint costs using the relative sales value method to ensure the correct decision is made.

Accepted Answer

The decision to process a joint product further beyond the split-off point should not be based on the allocation of joint costs because these costs are sunk costs and do not change with the decision. The decision should be based on whether the incremental revenue from processing further exceeds the incremental costs of processing.

Question 15

The term given to the practice of having a process undertaken by an external firm rather than a company doing it itself,is outsourcing.

Accepted Answer

The statement correctly defines outsourcing as the practice of delegating a process to an external firm instead of conducting it internally.

Quiz 19: Information for Decisions: Relevant Costs and Benefits