Accounting Information For Business Decisions 2nd Edition By Billie Cunningham – Test Bank

Chapter 11 – Short-Term Planning Decisions

COMPLETION

1. Decision making involves recognising the need for a decision, identifying alternative solutions, evaluating the solution and _________________________.

ANS: making the decision

PTS: 1 DIF: Easy TOP: Decision making

2. When a business evaluates each decision alternative the key question is ____________________?

ANS: what difference does it make

PTS: 1 DIF: Easy TOP: Decision making

3. One important area where decision alternatives make a difference is in a business’ ____________________.

ANS: profit

PTS: 1 DIF: Easy TOP: Relevant costs and revenues

4. ______________________________ are future costs and revenues that will change as a result of a decision.

ANS: Relevant costs and relevant revenues

PTS: 1 DIF: Easy TOP: Relevant costs and revenues

5. Future revenues are ____________________ revenues.

ANS: relevant

PTS: 1 DIF: Easy TOP: Relevant costs and revenues

6. Costs or revenues that do not differ between alternatives can be ____________________ because they will not help in choosing between alternatives.

ANS: ignored

PTS: 1 DIF: Moderate TOP: Relevant costs and revenues

7. No cost incurred ____________________ to the decision is relevant.

ANS: prior

PTS: 1 DIF: Easy TOP: What activities are necessary for the business to carry out the decision?

8. Relevant costs are ____________________ costs.

ANS: future

PTS: 1 DIF: Easy TOP: What activities are necessary for the business to carry out the decision?

9. ____________________ are cost increases resulting from the performance of an additional activity.

ANS: Incremental costs

PTS: 1 DIF: Easy TOP: Incremental costs

10. ____________________ are the costs that must be incurred to perform an activity, but that can be avoided if that activity is reduced or discontinued.

ANS: Avoidable costs

PTS: 1 DIF: Easy TOP: Avoidable costs

11. ____________________ are the profits forgone by following a particular course of action.

ANS: Opportunity costs

PTS: 1 DIF: Easy TOP: Opportunity costs

12. A ____________________ is a situation that is available when a customer offers to purchase a quantity of goods at less than the usual selling price.

ANS: special order

PTS: 1 DIF: Easy TOP: Illustration of determining relevant costs and revenues (special order)

13. A business should drop a product only if the total ____________________ costs are more than the revenue it would lose if it dropped the product.

ANS: avoidable

PTS: 1 DIF: Easy TOP: Deciding whether to drop a product

14. _________________________ is a decision that occurs if the profitability of a product declines.

ANS: Dropping a product

PTS: 1 DIF: Easy TOP: Deciding whether to drop a product

15. In the make versus buy decision, the business should ultimately choose the alternative with the lowest ____________________.

ANS: cost

PTS: 1 DIF: Easy TOP: Deciding whether to make or buy a part