BAC1054 Decision Making

An important step in management’s decision-making process is to determine and evaluate possible courses of action.

• True

• False

In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain constant.

• True

• False

A special one-time order should never be accepted if the unit sales price is less than the unit variable cost.

• True

• False

An incremental make-or-buy decision depends solely on which alternative is the lowest cost alternative.

• True

• False

An opportunity cost is the potential benefit obtained by using resources in an alternative course of action.

• True

• False

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered an opportunity cost.

• True

• False

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

• True

• False

The elimination of an unprofitable product line may adversely affect the remaining product lines.

• True

• False

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

• assign responsibility for the decision.

• provide relevant revenue and cost data about each course of action.

• determine the amount of money that should be spent on a project.

• decide which actions that management should consider.

Which of the following will always be a relevant cost?

• Sunk cost

• Fixed cost

• Variable cost

• Opportunity cost