Question :
11) Feedback from previous decisions uses historical information and, therefore, : 1216921
11) Feedback from previous decisions uses historical information and, therefore, is irrelevant for making future predictions.
12) The textbook discusses a five-step decision process. Briefly explain each of the five steps.
Obtaining information involves collecting all data pertinent to the decision situation, both quantitative and qualitative, and determining which information is relevant to the decision, and determining which alternatives are being considered.
Making predictions involves using the information obtained above and attempting to predict what the future costs and benefits will be for each of the various alternatives.
Choosing an alternative involves comparing the predicted benefits of each alternative with each of the predicted costs (as well as other non-quantitative factors), and selecting an alternative that maximizes the difference between the expected benefits and the expected costs.
Implementing the decision involves actually doing the alternative selected above and making all the necessary changes in operations to support the decision.
Evaluating the performance of the decision involves learning from the results of the decision and seeing which predictions were accurate and determining how to avoid any difficulties encountered in either the decision-process or the implementation.
Objective 11.2
1) For decision making, a listing of the relevant costs:
A) will help the decision maker concentrate on the pertinent data
B) will only include future costs
C) will only include costs that differ among alternatives
D) All of these answers are correct.
2) Sunk costs:
A) are historical costs
B) cannot be changed
C) are never relevant
D) all of the above
3) Sunk costs:
A) are relevant
B) are differential
C) have future implications
D) are ignored when evaluating alternatives
4) A car purchased last year is an example of a(n):
A) sunk cost
B) relevant cost
C) differential cost
D) avoidable cost
5) Costs that CANNOT be changed by any decision made now or in the future are:
A) fixed costs
B) indirect costs
C) avoidable costs
D) sunk costs
6) In evaluating different alternatives, it is useful to concentrate on:
A) variable costs
B) fixed costs
C) total costs
D) relevant costs
7) Which of the following costs always differ among future alternatives?
A) fixed costs
B) historical costs
C) relevant costs
D) variable costs
8) Which of the following costs are NEVER relevant in the decision-making process?
A) fixed costs
B) historical costs
C) relevant costs
D) variable costs
Answer the following questions using the information below:
John’s 8-year-old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again. His wife, Sherry, suggested that he should buy a 5-year-old used Jeep Grand Cherokee instead for $6,000 cash. Sherry estimated the following costs for the two cars:
Trail Blazer Grand Cherokee
Acquisition cost$25,000$6,000
Repairs$ 6,000?
Annual operating costs
(Gas, maintenance, insurance)$ 2,280$2,100
9) The cost NOT relevant for this decision is the:
A) acquisition cost of the Trail Blazer
B) acquisition cost of the Grand Cherokee
C) repairs to the Trail Blazer
D) annual operating costs of the Grand Cherokee
10) What should John do? What are his savings in the first year?
A) Buy the Grand Cherokee; $8,100
B) Fix the Trail Blazer; $3,180
C) Buy the Grand Cherokee; $180
D) Fix the Trail Blazer; $6,280
11) A relevant revenue is a revenue that is a(n):
A) past revenue
B) future revenue
C) in-hand revenue
D) earned revenue
12) A relevant cost is a cost that is a (n):
A) future cost
B) past cost
C) sunk cost
D) non-cash expense
13) Relevant information has all of these characteristics EXCEPT:
A) past costs are irrelevant
B) all future revenues and expenses are relevant
C) different alternatives can be compared by examining differences in total revenue and expenses
D) qualitative factors should be considered
14) Quantitative factors:
A) include financial information, but not nonfinancial information
B) can be expressed in monetary terms
C) are always relevant when making decisions
D) include employee morale
15) Qualitative factors:
A) generally are easily measured in quantitative terms
B) are generally irrelevant for decision making
C) may include either financial or nonfinancial information
D) include customer satisfaction
16) Historical costs are helpful:
A) for making future predictions
B) for decision making
C) because they are quantitative
D) None of these answers is correct.
17) When making decisions:
A) quantitative factors are the most important
B) qualitative factors are the most important
C) appropriate weight must be given to both quantitative and qualitative factors
D) both quantitative and qualitative factors are unimportant
18) Employee morale at Dos Santos, Inc., is very high. This type of information is known as a:
A) qualitative factor
B) quantitative factor
C) nonmeasurable factor
D) financial factor
19) Roberto owns a small body shop. His major costs include labor, parts, and rent. In the decision-making process, these costs are considered to be:
A) fixed
B) qualitative factors
C) quantitative factors
D) variable
20) One-time-only special orders should only be accepted if:
A) incremental revenues exceed incremental costs
B) differential revenues exceed variable costs
C) incremental revenues exceed fixed costs
D) total revenues exceed total costs
