Question : Objective 11.7 1) Managers tend to favor the alternative that makes : 1211772

Objective 11.7

1) Managers tend to favor the alternative that makes their performance look best. Therefore, they tend to focus on ________.

A) how to implement the chosen alternative

B) the measures used in the decision model

C) the measures used in the performance evaluation model

D) gathering the required information

2) Book value is defined as the ________.

A) sum of the original cost of an asset and the accumulated depreciation

B) difference between the market value of an asset and the accumulated depreciation

C) difference between the original cost of an asset and the accumulated depreciation

D) sum of the market value of an asset and the accumulated depreciation

3) If management takes a multiple-year view in the decision model and judges success according to the current year’s results, a problem will occur in the ________.

A) decision model

B) performance evaluation model

C) production evaluation model

D) quantitative model

4) ________ is relevant in a decision to replace equipment.

A) Warehouse rent costs

B) Book value of old equipment

C) Accumulated depreciation on old equipment

D) Salvage value

5) Which of the following is true in a decision to keep or replace existing equipment?

A) The book value of the old equipment is relevant.

B) The disposal value of the old equipment is relevant.

C) Property taxes is relevant.

D) Depreciation on the new equipment is relevant.

6) A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

A) the book value of the old equipment

B) the depreciation expense on the old equipment

C) the loss on the disposal of the old equipment

D) the setup cost of the new equipment

7) What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

A) It is relevant since it increases the cost of the new equipment.

B) It is irrelevant since it reduces the cost of the old equipment.

C) It is irrelevant to the decision since it does not impact the cost of the new equipment.

D) It is relevant since it reduces the cost of the new equipment.

Answer the following questions using the information below:

Pizza For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:

Existing vanNew van

Original cost$50,000$90,000

Annual operating cost$ 17,500$ 10,000

Accumulated depreciation$ 30,000—

Current salvage value of the existing van$ 22,500—

Remaining life10 years10 years

Salvage value in 10 years$ 0$ 0

Annual depreciation$ 2,000$ 9,000

8) Sunk costs include ________.

A) the accumulated depreciation of the existing van

B) the original cost of the new van

C) the current salvage value of the existing van

D) the annual operating cost of the new van

9) Relevant costs for this decision include ________.

A) the original cost of the existing van

B) accumulated depreciation

C) the annual operating cost

D) the book value of the existing van

10) If Pizza For Everyone replaces the existing delivery van with the new one, over the next 10 years operating income will ________.

A) decrease by $90,000

B) increase by $75,000

C) decrease by $75,000

D) increase by $90,000