1.Relevant costs are often
referred to as: (Points : 2)
2. 2.Centennial Tours is trying to decide which one of two tours it
will introduce. The costs and revenues associated with each alternative are
What are the incremental (differential) costs of Tour B? (Points : 2)
3. 3.Emily paid $2 for a bottle of ThirstAid. Later while on a
hiking trip, she was offered $10 for the ThirstAid. Select the correct
statement from the following. (Points : 2)
The $2 original purchase
price is a sunk cost.
If Emily drinks the ThirstAid, no opportunity cost is associated with her
The $10 offer is not relevant if Emily refuses to sell the ThirstAid.
All of the above are correct.
4. 4.For purposes of decision making, avoidable costs are costs
that: (Points : 2)
were incurred in the past.
will be incurred in the
future and differ between the alternatives.
do not differ between alternatives.
are not relevant in decision making.
5. 5.Dalton Company is trying to decide between the following two
Which of the following conclusions can be drawn from this example? (Points
Variable costs are always relevant for decision making.
Fixed costs are sunk and thus are never relevant for decision making.
Relevant costs may
include variable costs and fixed costs.
The amount of revenue is not relevant to this decision.
6. 6.Alicia brought her lunch today but now a coworker has asked
her to go to the deli across the street. Select the correct statement from
the following. (Points : 2)
The cost of the lunch Alicia already has is relevant to Alicia’s decision to
have lunch with her friend.
The cost of the lunch Alicia already has represents the opportunity cost of
dining with her friend.
The cost to buy lunch at the deli is not relevant because it has not yet been
The cost of the lunch that Alicia brought has nothing to do with her current
decision because it is a sunk cost.
7. 7.Select the correct statement regarding relevant costs and
revenues. (Points : 2)
Relevant costs are also known as avoidable costs.
Relevant costs are future-oriented.
Relevant revenues must differ between the alternatives.
All of the above are
8. 8.Frank is trying to decide which one of two job offers he will
accept. Several items are presented below:
Job Offer A
Job Offer B
Job search costs
Which of the above job criterion would be considered sunk costs? (Points :
(1), (3), (5)
None of the above
9. 9.Which of the following costs generally is an example of a
product-level cost? (Points : 2)
Inventory holding costs
Machine setup costs
Materials and labor
Shipping and handling costs
10. 10.The cost that is avoided when a company eliminates a single
item of a product or service is a: (Points : 2)
11. 11.Select the incorrectstatement about the planning
process. (Points : 2)
The longer the time period, the less specific the plans.
Planning decisions can often be sub-divided into three distinct planning
phases, short-term, intermediate-term, and long-term.
The nature of planning changes with the length of the time period being considered.
The shorter the time
period, the more general the plans.
12. 12.Expressing plans for a business in financial terms is
commonly called: (Points : 2)
13. 13.Which of the following budgets or schedules uses data
contained in the selling and administrative expense budget? (Points : 2)
Cash payments schedule
Cash receipts schedule
Inventory purchases budget
14. 14.Maddon Company estimated that its inventory purchases for
January and February 2010 would be $300,000 and $370,000, respectively. The
company generally pays for 60% of its inventory purchases in the month of
purchase because it receives a 2% discount for timely payment. The
remaining 40% of purchases are paid for in the following month, and there
is no discount for these payments. What will be the amount of cash payments
for inventory in February 2010? (Points : 2)
15. 15.McDavid Company has completed its sales budget for the first
quarter of 2010. Projected credit sales for the first four months of the
year are shown below:
The company’s past records show collection of credit sales as follows: 30%
in the month of sale and the balance in the following month. The total cash
collection from receivables in February is expected to be: (Points : 2)
16. 16.Select the correct equation format for the purchases budget.
(Points : 2)
financial condition or position that can be expected if planning assumptions
all of the above.
18. 18.Which of the following is nota benefit of budgeting?
(Points : 2)
Sets realistic standards that serve as benchmarks for evaluating performance
Coordinates the activities of the company by integrating the plans of all
Requires managers to plan ahead and to formalize their objectives
Provides assurance that
accounting records are in accordance with generally accepted accounting
19. 19.When Northern Company district managers submitted their
preliminary budget proposals, top management discovered that the southern
district manager had requested a new project management information system.
Unfortunately, the system is incompatible with the system used at
headquarters. Which of the following advantages of budgeting reduces the
likelihood that the company will end up with two incompatible systems?
(Points : 2)
20. 20.Select the incorrect statement about budgeting and human
behavior. (Points : 2)
People are often uncomfortable with budgets.
Budgets are constraining.
Budgets limit individual freedom in favor of an established plan.
Few people find evaluation based on budget expectations stressful.