CHP 7 T/F

Although important to managers, the solution to most business problems does not involve incremental analysis.

F

Fixed costs are (never) relevant and are (not) considered in decision making.

F

Fixed costs are always sunk costs and are therefore irrelevant.

F

In analyzing a decision to drop a product line, avoidable fixed costs often result in a cost allocation death spira

F

Incremental costs are also referred to as opportunity costs.

F

It is always in the best interest of a company to drop a product line that has net operating losses.

F

Joint costs are defined as two or more costs that are combined to make one product.

F

Opportunity costs are relevant, but are (not) considered in decision making.

F

Qualitative aspects of decision situations need not be considered (in decision making.)

F

Quantitative figures are the basis on which all make or buy decisions must be made.

F

Sunk costs are relevant in decision making.

F

Using the relative sales value method, the amount of joint cost allocated to products depends on the relative sales value of the products at the (final stage) of production.

F

An advantage of using an outside supplier is that the adverse effect of a downturn in business is less severe.

T

Fixed costs can be sunk and irrelevant, not sunk and irrelevant, or not sunk and relevant.

T

For financial reporting purposes, the cost of the common inputs must be allocated to the joint products.

T

In a make or buy decision, incremental revenue is not involved in the decision.

T

In analyzing a decision to drop a product line, UNavoidable fixed costs often result in a cost allocation death spira

T

Incremental costs are also referred to as relevant costs or differential costs.

T

Joint costs are not incremental to production of an individual joint product.

T

Joint costs are the costs of common inputs

T

Opportunity costs are relevant and (must) be considered in decision making.

T

Performance measures related to production volume such as units produced per hour can have a negative impact on shareholder value when they are applied to nonbottleneck departments.

T

Qualitative aspects of decision situations (must receive the same attention as quantitative components.)

T

Relevant costs are always avoidable.

T

Sunk costs are (never) relevant and are (not) considered in decision making.

T

The process of determining major activities occurs before the resources used by each activity are identified in performing an activity-based management study.

T

The solution to all business problems involves incremental analysis.

T

Using the relative sales value method, the amount of joint cost allocated to products depends on the relative sales value of the products at the (split-off point.)

T