Question 1. Question : Done on a regular

29 Jun Question 1. Question : Done on a regular

Question
1. Question : Done on a regular basis, relevant cost pricing in special order decisions can erode normal pricing policies and lead to:

Overconfidence in decision-making.

A decrease in the firm’s long-term profitability.

Goal congruence between management and sales personnel.

A cost leadership strategy.

Maximization of the value stream.

Question 2. Question : In a sell-or-process-further decision, joint production costs:

Are irrelevant to the decision.

Should be allocated to outputs on the basis of relative sales dollars.

Should be allocated to outputs on the basis of relative physical units.

Cannot be allocated to products for financial reporting purposes.

Question 3. Question : Joint (common) costs in a joint production process are relevant for determining:

Whether to produce at all.

Which products should be produced up to the split-off point in the production process.

Which products should be produced internally and which products should be outsourced.

The set of products that should be subjected to additional processing.

The selling price of individual products produced as part of the joint production process.

Question 4. Question : In deciding whether to manufacture a part or buy it from an outside vendor, a cost that is irrelevant to this short-run decision is:

Direct labor.

Variable overhead.

Fixed overhead that will be avoided if the part is bought from an outside vendor.

Fixed overhead that will continue even if the part is bought from an outside vendor.

Question 5. Question : Value streams are useful in decision-making because:

They identify all value-added products and services.

They help to highlight the improved efficiency in the plant.

Special orders can be evaluated within the context of the value stream.

Irrelevant costs are identified.

Lean thinking produces better decision making.

Question 6. Question : When deciding whether to discontinue a segment of a business, managers should focus on:

The amount of operating income per unit produced by the segment.

The amount of contribution margin per direct labor hour in the segment.

How corporate-level administrative costs would be redistributed if the segment were eliminated.

Equipment from the segment that could go idle if the segment were discontinued.

The total contribution margin generated by the segment relative to any traceable (avoidable) fixed costs associated with the segment.

Question 7. Question : Which one of the following is an advantage of the book (accounting) rate of return method for analyzing capital investment proposals?

It is not affected by different accounting methods.

It is precise and objective.

Data for calculating the return are typically readily available.

The method explicitly adjusts for the time value of money.

The accounting rate of return is generally approximately equal to a project’s internal rate of return (IRR).

Question 8. Question : Which of the following characteristics is not true of the modified internal rate of return (MIRR)?

Unlike IRR, MIRR does not consider the time value of money.

It focuses on after-tax cash flows, rather than accounting income amounts.

It cannot be used reliably to choose between mutually exclusive projects.

Its use may not lead to an optimum capital budget.

Question 9. Question : Research has shown that in framing capital investment decisions, sunk costs tend to:

Have no discernible impact on decisions by managers.

Have a slight impact on the decision-making process.

Have an impact only when capital funds are limited.

Escalate commitment in making capital budgeting decisions.

Question 10. Question : Which of the following statements regarding capital investment analysis is false?

A long-term planning horizon is assumed.

Benefits of potential investment projects are conceptually expressed in terms of accounting income (or reduction in costs).

Project acceptance decisions are based on models that explicitly incorporate the time value of money.

Need to incorporate income-tax effects in the analysis, for both revenues (gains) as well as expenses (losses).

Discounted cash flow (DCF) decision models are used by a majority of large organizations.

Question 11. Question : Which of the following is not a characteristic of capital budgeting post-audits?

They provide feedback to managers regarding the soundness of their decision-making.

They encourage managers to build slack into capital investment proposals.

They are sometimes difficult to implement in practice.

They may be cost-prohibitive to accomplish.

They help keep actual projects on target (e.g., by limiting project managers from diverting project funds, without authorization, to other uses).

Question 12. Question : Which of the following is NOT one of the more common strategic benefits provided by capital investment projects?

Being able to deliver a product that competitors cannot (i.e., product differentiation).

Improving product quality.