Do you agree that the cost benefit rule
conflicts with our traditional principles of
“never give up” and “go for it”?
1. Yes
2. No
50%
1
50%
2
Do all companies such as RealNetworks,
Inc. use cost-benefit analysis for decisionmaking?
1. Yes
2. No
50%
1
50%
2
Do you think that the cost-benefit approach
to help in selecting alternatives is a complex
process?
1. Yes
2. No
50%
1
50%
2
Do you think that computers and software
can help in performing cost-benefit and
differential analysis for decision-making?
1. Yes
2. No
50%
1
50%
2
Do companies like RealNetworks, Inc. ever
choose the wrong alternative using costbenefit analysis and differential analysis?
1. Yes
2. No
50%
1
50%
2
Differential cost is the amount of increase or
decrease that is expected from a course of
action as compared with an alternative.
1. True
2. False
50%
1
50%
2
When using differential analysis to lower selling prices
for special short-run decisions, the minimum short-run
price is set high enough to cover all variable costs.
1. True
2. False
50%
1
50%
2
An opportunity cost appears as a
part of historical accounting data.
1. True
2. False
50%
1
50%
2
In a demand-based method, if there is a
high demand for the product, then the price
may be set low.
1. True
2. False
50%
1
50%
2
Managers using the cost-plus methods price
the product in order to achieve a target
profit.
1. True
2. False
50%
1
50%
2
When managers add to the cost of
a product it is called a net gain.
1. True
2. False
50%
1
50%
2
A production bottleneck occurs at the point in the
process where the demand for the company’s
product exceeds the ability to produce the product.
1. True
2. False
50%
1
50%
2
Costs that have been incurred in the past
and are not relevant to the decision are
called
25%
1.
2.
3.
4.
25%
25%
25%
fixed costs
variable costs
sunk costs
committed costs
1
2
3
4
The analysis that focuses on the effect of
alternative courses of action on the relevant
revenues and costs is called
25%
25%
25%
25%
1. variance analysis
2. income statement
analysis
3. performance
analysis
4. differential
analysis
1
2
3
4
Differential analysis can be used to analyze
which of the following alternatives?
1. Leasing or selling
equipment
2. Discontinuing an
unprofitable
segment
3. Manufacturing or
purchasing a
needed part
4. All of these choices
25%
1
25%
2
25%
3
25%
4
The amount of income that is foregone from
an alternative use of an asset, such as cash,
is called a(n)
25%
1.
2.
3.
4.
25%
25%
25%
opportunity cost
sunk cost
fixed cost
contribution
margin
1
2
3
4
Which of the following is not a cost concept
used in applying the cost-plus approach?
25%
1.
2.
3.
4.
25%
25%
25%
Total cost
Sunk cost
Product cost
Variable cost
1
2
3
4
Using the total cost concept, all the cost of
manufacturing a product
1.
2.
3.
4.
less the selling and
administrative expenses gives
the cost amount to which the
markup is deducted
plus the selling and
administrative expenses are
included in the cost amount to
which the markup is deducted
plus the selling and
administrative expenses are
included in the cost amount to
which the markup is added
less the selling and
administrative expenses gives
the cost amount to which the
markup is added
25%
1
25%
2
25%
3
25%
4
The formula for the markup percentage under the
product cost concept is
1.
2.
3.
4.
desired profit divided by
total costs
desired profit plus total
selling and administrative
expenses divided by total
manufacturing costs
desired profit plus total
fixed costs divided by total
variable costs
desired profit less total
selling and administrative
expenses divided by total
manufacturing costs
25%
1
25%
2
25%
3
25%
4
Which of the following is not a
cost-plus method?
25%
25%
25%
25%
1. Total cost concept
2. Product cost
concept
3. Variable cost
concept
4. Demand-based
method
1
2
3
4
A method that combines market-based
pricing with a cost-reduction emphasis is
25%
25%
25%
25%
1. target costing
2. activity-based
costing
3. variable costing
4. product costing
1
2
3
4
The theory of constraints (TOC) is a manufacturing
strategy that focuses on
1.
2.
3.
4.
reducing variable
costs for products
reducing the influence
of bottlenecks on a
process
maximizing operating
efficiency in the
manufacturing
process
earning the maximum
net income for a
company
25%
1
25%
2
25%
3
25%
4