Wild7e Chapter 10 TB Answer Key PDF

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Principles of Managerial Accounting Wild7e Chapter 10 Test Bank Answer Key...

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Managerial Accounting, 7e (Wild) Chapter 10 Relevant Costing for Managerial Decisions 1) An opportunity cost is the potential benefit lost by taking a specific action when two or more alternative choices are available. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 2) Incremental costs are the additional costs incurred if a company pursues a certain course of action. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 3) Opportunity costs are the additional or incremental revenues generated by selecting a certain course of action. Answer: FALSE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 4) A sunk cost will change with a future course of action. Answer: FALSE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

5) A sunk cost arises from a past decision and cannot be avoided or changed. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 6) Sunk costs are irrelevant to future decisions. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 7) An out-of-pocket cost requires a future outlay of cash and is relevant for current and future decision making. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 8) Another name for relevant cost is unavoidable cost. Answer: FALSE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making

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9) Incremental revenues refer to the additional revenue generated by selecting a particular course or action over another. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 10) Significant sunk costs are relevant to decisions about the future. Answer: FALSE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 11) The concept of incremental cost is the same as the concept of differential cost. Answer: TRUE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 12) Additional business in the form of a special order of goods or services should be accepted when the incremental revenue equals the incremental costs. Answer: FALSE Difficulty: 2 Medium Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making

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13) In a make or buy decision, management should focus on costs that are the same under the two alternatives. Answer: FALSE Difficulty: 2 Medium Topic: Make or Buy Learning Objective: 10-P1 Evaluate make or buy decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 14) Part of the decision to accept additional business should be based on a comparison of the incremental (differential) costs of the added production with the additional revenues to be received. Answer: TRUE Difficulty: 2 Medium Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 15) Incremental costs should be considered in a make or buy decision. Answer: TRUE Difficulty: 1 Easy Topic: Make or Buy Learning Objective: 10-P1 Evaluate make or buy decisions. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 16) If a company has the capacity to produce either 10,000 units of Product A or 10,000 units of Product B; assuming fixed costs are the same, production restrictions are the same for both products, and the markets for both products are unlimited; the company should commit 100% of its capacity to the product that has the higher contribution margin per unit of operating capacity. Answer: TRUE Difficulty: 2 Medium Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 4 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

17) The decision to accept an additional volume of business should be based on a comparison of the revenue from the additional business with the sunk costs of producing that revenue. Answer: FALSE Difficulty: 1 Easy Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 18) Sunk costs are irrelevant to future decisions as they cannot be changed or avoided. Answer: TRUE Difficulty: 2 Medium Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 19) Wages from a job a student gives up to attend summer school would be a sunk cost. Answer: FALSE Difficulty: 3 Hard Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Apply AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 20) The cost of equipment purchased by a company last year would be an avoidable cost. Answer: FALSE Difficulty: 3 Hard Topic: Segment Elimination Learning Objective: 10-P4 Evaluate segment elimination decisions. Bloom's: Apply AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement

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21) A special order of goods or services should be accepted when the incremental revenue exceeds the normal revenue. Answer: FALSE Difficulty: 2 Medium Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 22) Assuming a company has excess operating capacity, a special order should be accepted if its incremental revenues exceed the incremental costs, and the special order does not negatively impact existing business. Answer: TRUE Difficulty: 2 Medium Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 23) The decision to accept additional business should be based on a comparison of the incremental costs of the added production with the additional revenues to be received. Answer: TRUE Difficulty: 2 Medium Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 24) If the cost to buy a part is less than the direct material, direct labor, and incremental overhead cost of making the part, the company should buy the part. Answer: TRUE Difficulty: 2 Medium Topic: Make or Buy Learning Objective: 10-P1 Evaluate make or buy decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement

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25) A company's best sales mix is determined using contribution margin per unit of scarce resource. Answer: TRUE Difficulty: 2 Medium Topic: Sales Mix Selection When Resources Are Constrained Learning Objective: 10-P3 Determine sales mix with constrained resources. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 26) The total cost method determines a selling price equal to a product's total costs plus a desired profit on the product. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Decisions Learning Objective: 10-P6 Determine product selling price using cost data. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 27) Markup percentage equals total costs divided by desired profit. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Decisions Learning Objective: 10-P6 Determine product selling price using cost data. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 28) Incremental costs are also called out-of-pocket costs. Answer: FALSE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement

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29) Additional costs incurred if a company pursues a certain course of action are sunk costs. Answer: FALSE Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 30) If accepting additional business would cause existing sales to decline, the offer should always be declined. Answer: FALSE Difficulty: 2 Medium Topic: Special Offers Learning Objective: 10-P7 Evaluate special offer decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 31) Contribution margin lost from a decline in sales is an opportunity cost. Answer: TRUE Difficulty: 2 Medium Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement 32) Additional power for operating machines, extra supplies, and added cleanup costs are examples of incremental overhead costs. Answer: TRUE Difficulty: 3 Hard Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Apply AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Industry; FN Measurement

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33) Employee morale, timeliness of delivery, and the reactions of customers are examples of nonfinancial factors that should be considered when making a managerial decision. Answer: TRUE Difficulty: 3 Hard Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Apply AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 34) Costs already incurred in manufacturing the units of a product that do not meet quality standards are relevant costs in a scrap or rework decision. Answer: FALSE Difficulty: 2 Medium Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 35) Sales mix refers to the combination of products sold by a company. Answer: TRUE Difficulty: 1 Easy Topic: Sales Mix Selection When Resources Are Constrained Learning Objective: 10-P3 Determine sales mix with constrained resources. Bloom's: Remember AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 36) To maximize profit when a constrained resource exists, management should produce the sales mix that has the highest contribution margin per unit of scarce resource. Answer: TRUE Difficulty: 3 Hard Topic: Sales Mix Selection When Resources Are Constrained Learning Objective: 10-P3 Determine sales mix with constrained resources. Bloom's: Apply AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry

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37) The decision to sell or process a product further is analyzed by identifying the incremental costs and benefits of further processing. Answer: TRUE Difficulty: 3 Hard Topic: Sell or Process Further Learning Objective: 10-P2 Evaluate sell or process further decisions. Bloom's: Apply AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: FN Decision Making; BB Industry 38) An opportunity cost: A) Is an unavoidable cost because it remains the same regardless of the alternative chosen. B) Requires a current outlay of cash. C) Results from past managerial decisions. D) Is the potential benefit lost by choosing a specific alternative course of action among two or more. E) Is irrelevant in decision making because it occurred in the past. Answer: D Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 39) The potential benefits lost by taking a specific action when two or more alternative choices are available is known as a(n): A) Alternative cost. B) Sunk cost. C) Out-of-pocket cost. D) Differential cost. E) Opportunity cost. Answer: E Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making

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40) A cost that requires a future outlay of cash, and is relevant for current and future decision making, is a(n): A) Out-of-pocket cost. B) Sunk cost. C) Opportunity cost. D) Operating cost. E) Uncontrollable cost. Answer: A Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 41) A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n): A) Uncontrollable cost. B) Incremental cost. C) Opportunity cost. D) Out-of-pocket cost. E) Sunk cost. Answer: E Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making

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42) A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $200,000 original cost of the machine is an example of a(n): A) Incremental cost. B) Opportunity cost. C) Variable cost. D) Sunk cost. E) Out-of-pocket cost. Answer: D Difficulty: 2 Medium Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Understand AACSB/Accessibility: Analytical Thinking / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making 43) An additional cost incurred only if a company pursues a particular course of action is a(n): A) Period cost. B) Pocket cost. C) Discount cost. D) Incremental cost. E) Sunk cost. Answer: D Difficulty: 1 Easy Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Describe the importance of relevant costs for short-term decisions. Bloom's: Remember AACSB/Accessibility: Communication / Keyboard Navigation AICPA: BB Resource Management; FN Decision Making

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44) A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years. The $19,000 cost is an example of a(n): A) Sunk cost. B) Fixed cost. C) Incremental cost. D) Uncontrollable cost. E) Opportunity cost. Answer: C Difficulty: 2 Medium Topic: Relevant Costs and Benefits Learning Objective: 10-C1 Desc...