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WorksheetsChapter 7 - Incremental Analysis - LO 1
Total questions: 23
Worksheet time: 12mins
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 stages of the management decision-making process is improperly sequenced?
Evaluate possible courses of action + Make decision.
Assign responsibility for the decision + Identify the problem.
Identify the problem + Determine possible courses of action.
Assign responsibility for decision + Determine possible courses of action.
Internal reports that review the actual impact of decisions are prepared by
department heads.
the controller.
management accountants.
factory workers.
Which of the following steps in the management decision-making process does not generally involve the managerial accountant?
Determine possible courses of action.
Make the appropriate decision based on relevant data.
Prepare internal reports that review the impact of decisions.
None of these answers are correct.
Which is the first step in the management decision-making process?
Determine and evaluate possible courses of action.
Review results of the decision.
Identify the problem and assign responsibility.
Make a decision.
Which of the following will always be a relevant cost?
Sunk cost
Fixed cost
Variable cost
Opportunity cost
Costs that will differ between alternatives and influence the outcome of a decision are
sunk costs.
unavoidable costs.
relevant costs.
product costs.
A revenue that differs between alternatives and makes a difference in decision-making is called a(n)
sales revenue.
incremental revenue.
unavoidable revenue.
irrelevant revenue.
Alvarez Company is considering the following alternatives:
Alternative A Alternative B
Revenues $50,000 $60,000
Variable costs 30,000 30,000
Fixed costs 10,000 16,000
What is the incremental profit?
$10,000
$0
$6,000
$4,000
Which of the following is an irrelevant cost?
An avoidable cost
An incremental cost
A sunk cost
An opportunity cost
Relevant costs are always
fixed costs.
variable costs.
avoidable costs.
sunk costs.
The process of evaluating financial data that change under alternative courses of action is called
double entry analysis.
contribution margin analysis.
incremental analysis.
cost-benefit analysis.
Nonfinancial information that management might evaluate in making a decision would not include
employee turnover.
contribution margin.
the environment.
the corporate profile in the community.
Incremental analysis is synonymous with
difficult analysis.
differential analysis.
gross profit analysis.
derivative analysis.
In incremental analysis,
only costs are analyzed.
only revenues are analyzed.
both costs and revenues may be analyzed.
both costs and revenues that stay the same between alternate courses of action will be analyzed.
Incremental analysis is most useful
in developing relevant information for management decisions.
in choosing between capital budgeting methods.
in evaluating the master budget.
as a replacement technique for variance analysis.
The source of data to serve as inputs in incremental analysis is generated by
market analysts.
engineers.
accountants.
All of these answers are correct.
Which of the following is not a true statement?
Incremental analysis might also be referred to as differential analysis.
Incremental analysis is the same as CVP analysis.
Incremental analysis is useful in making decisions.
Incremental analysis focuses on decisions that involve a choice among alternative courses of action.
Incremental analysis would not be appropriate for
a make or buy decision.
an allocation of limited resource decision.
elimination of an unprofitable segment.
analysis of manufacturing variances.
Incremental analysis would be appropriate for
acceptance of an order at a special price.
a retain or replace equipment decision.
a sell or process further decision.
All of these answers are correct.
Which of the following is a true statement about cost behaviors in incremental analysis?
1. Fixed costs will not change between alternatives.
2. Fixed costs may change between alternatives.
3. Variable costs will always change between alternatives.
1
2
3
2 and 3
A company is considering the following alternatives:
Alternative 1 Alternative 2
Revenues $120,000 $120,000
Variable costs 60,000 70,000
Fixed costs 35,000 35,000
Which of the following are relevant in choosing between the alternatives?
Variable costs
Revenues
Fixed costs
Variable costs and fixed costs
Accounting’s contribution to the decision-making process occurs in all of the following steps except to
identify the problem and assign responsibility.
determine possible courses of action.
review results of the decision.
make a decision.
