Pop Quiz Chapter 11

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

• true

• false

In making decisions, management ordinarily considers both financial and non-financial information.

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

• true

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Accountants are mainly involved in developing non-financial information for management's consideration in choosing among alternatives.

• true

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Decision-making involves choosing among alternative courses of action.

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

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If a company has excess capacity and present markets will not be affected, it would be profitable to accept an order at a special unit price even though the price is less than the unit variable cost to manufacture the item.

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A decision whether to continue to make a product or buy it externally, depends on the external price and the amount of variable and fixed costs that can be eliminated assuming no alternative uses of resources.

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

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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.