Management Accounting Chapter 5 Quiz

<p>Only future costs that differ among alternatives should be considered (B)</p> Signup and view all the answers

<p>They often lack clear representation in financial terms (C)</p> Signup and view all the answers

<p>The potential closure of the company's facilities (D)</p> Signup and view all the answers

<p>The cost of materials that cannot be sold or used (C)</p> Signup and view all the answers

<p>What difference will it make? (C)</p> Signup and view all the answers

<p>Acting as technical experts on financial analysis (D)</p> Signup and view all the answers

<p>Predictive data that will differ among alternatives (D)</p> Signup and view all the answers

<p>Long-run decision analysis (D)</p> Signup and view all the answers

<p>Past costs that do not change (A)</p> Signup and view all the answers

<p>Decisions cannot affect past data. (D)</p> Signup and view all the answers

<p>Cost that remains the same regardless of alternatives (C)</p> Signup and view all the answers

<p>Only the costs that are relevant to each alternative (B)</p> Signup and view all the answers

<p>If it differs from alternative to alternative (B)</p> Signup and view all the answers

<p>Decline in employee morale (A)</p> Signup and view all the answers

<p>They can impact future profitability (D)</p> Signup and view all the answers

<p>Single supplier with heavy reliance on repeat sales (C)</p> Signup and view all the answers

<p>Potential loss of customer goodwill (D)</p> Signup and view all the answers

<p>Due to the high cost of obtaining accurate information (D)</p> Signup and view all the answers

<p>It is considered worthless for decision-making (D)</p> Signup and view all the answers

<p>Availability of multiple suppliers (A)</p> Signup and view all the answers

<p>Effect on the company's ability to meet demand (A)</p> Signup and view all the answers

<p>Company’s cost accounting system (C)</p> Signup and view all the answers

<p>Differential costs relate to the future, while full costs are historical. (B)</p> Signup and view all the answers

<p>Variable costs become differential costs only when there's a change in volume. (B)</p> Signup and view all the answers

<p>The potential benefit missed when choosing one option over another. (B)</p> Signup and view all the answers

<p>Both fixed and variable costs (A)</p> Signup and view all the answers

<p>They help quantify the trade-offs of different options. (D)</p> Signup and view all the answers

<p>They help estimate future costs linked to specific choices. (C)</p> Signup and view all the answers

<p>They are synonymous with variable costs. (D)</p> Signup and view all the answers

<p>Sunk cost (A)</p> Signup and view all the answers

<p>They apply only when resources are scarce. (A)</p> Signup and view all the answers

<p>Costs that require a cash outlay if a decision is made. (B)</p> Signup and view all the answers

<p>Sunk costs are irrelevant to current decision-making. (D)</p> Signup and view all the answers

<p>It becomes zero. (B)</p> Signup and view all the answers

<p>They are often the same in many situations. (C)</p> Signup and view all the answers

<p>Costs that reflect past investments. (D)</p> Signup and view all the answers

<p>Opportunity costs may not require immediate cash outlay. (D)</p> Signup and view all the answers

<p>Only considering costs that are expected to change in the future (A)</p> Signup and view all the answers

<p>At the total costs including fixed overheads (A)</p> Signup and view all the answers

<p>They can artificially inflate the total cost (B)</p> Signup and view all the answers

<p>Fixed overheads (C)</p> Signup and view all the answers

<p>The availability of existing labor without extra cost (C)</p> Signup and view all the answers

<p>Reducing the overall accuracy of financial forecasts (C)</p> Signup and view all the answers

<p>Future variable manufacturing costs (C)</p> Signup and view all the answers

<p>Only including relevant future costs and excluding the irrelevant ones (B)</p> Signup and view all the answers

Predicted future costs and revenues that differ among various choices/alternatives.

Information that remains the same regardless of the decision taken.

Choosing the best option among available alternatives.

Costs and revenues that differ between alternative choices.

Decision making focused on the immediate period.

Decision making focused on future periods.

Past data that's not relevant for making future decisions.

Providing information to enable sound management decisions.

Costs that change depending on the decision you make. They impact the outcome of different choices.

Costs that stay the same regardless of which decision you choose. They don't affect the outcome.

Raw materials used in the production process that are directly traceable to the finished product.

The wages paid to workers who directly manufacture the product.

Costs that change proportionally to the volume of production. They are related to the output.

Costs that remain constant regardless of production levels. They are incurred whether you produce more or less.

The process of determining the value of goods held in inventory for financial reporting purposes.

Costs and revenues that are considered when choosing between different options. They impact the outcome of the decision.

Materials purchased but not needed for current production. They may have no alternative use or a resale value.

Factors important in a decision that are difficult or impossible to quantify in monetary terms (e.g., reputation, employee morale).

Factors important in a decision that can be easily measured and expressed in monetary terms (e.g., cost of materials, labor).

The process of identifying and evaluating alternatives, analyzing their consequences, and choosing the best option.

A company that provides goods or services to another company.

The decision to stop operating a factory or production facility.

In decision-making, there's often a balance between having information that is highly relevant (useful) and information that is perfectly accurate. Sometimes, relevant but slightly imprecise information is more valuable than extremely accurate but irrelevant data.

Qualitative factors can influence a decision even when they are not easily quantifiable. For example, a company might choose a supplier with slightly higher prices but a strong reputation for reliability, considering the potential impact on customer satisfaction.

While accuracy is important, sometimes information that is highly accurate but irrelevant to the decision at hand is not useful. For example, knowing the exact cost of a competitor's product might be useless if it's not relevant to your pricing or product strategy.

When choosing a supplier, companies must weigh the potential impact of the supplier's reliability on customer satisfaction and future sales. A more reliable supplier might be worth paying more.

While historical information is valuable, it's not always relevant for making future decisions. The past may not be a reliable indicator of future performance due to changing market conditions or unexpected events.

Optimal decision-making often requires considering both measurable quantifiable factors (like costs, revenues) and intangible qualitative factors (like reputation, morale).

A cost already incurred and irrelevant to future decisions. It's money spent in the past that can't be recovered.

The potential benefit lost by choosing one option over another. It's the value of the best alternative foregone.

A cost requiring an immediate cash outflow if a specific decision is made. It's money you'll pay now.

Depreciation is a sunk cost because it's the gradual write-off of a fixed asset's value over time. The initial cost of the asset was incurred in the past.

The book value of a fixed asset is also a sunk cost. It's the remaining value after depreciation, representing the unrecovered portion of the initial cost.

Sunk costs are irrelevant to future decisions, especially when choosing between alternatives. They are past costs that don't affect future outcomes.

While all sunk costs are irrelevant to future decisions, not all irrelevant costs are sunk costs. Other factors, like fixed costs, can also be irrelevant.

Opportunity costs only apply to scarce resources. If a resource is abundant and freely available, there's no cost to using it.

The difference in cost between two alternative courses of action. It measures the change in costs when a specific decision is made.

Data for differential costs can come from the cost accounting system or other sources depending on the specific problem.

Differential costs are always future-oriented. They focus on what costs would be if a decision is made, not what they were in the past.

Variable costs are those that change directly with output volume. Differential costs encompass both variable and fixed costs, and may apply to situations beyond just volume changes.

Subtract the benefit of the chosen alternative from the benefit of the best forgone alternative.

If a company owns land worth L.E. 500,000 and chooses to use it for a new headquarters instead of selling it, the opportunity cost is L.E. 500,000, the profit they could have earned by selling the land.

Opportunity costs are important in decision-making because they help you assess the true cost of a choice by considering the value of forgone alternatives.