Which of the following statements is true? (Points : 2)
Fixed costs are never relevant for decision making.
Opportunity costs are never relevant to decision making.
Information does not have to be exactly accurate to be relevant to decision making.
A cost that is relevant in one decision context is relevant in other decision contexts.
Andy is trying to decide which one of two job offers he will accept. Several items are presented below:Job Criterion
Job Offer A
Job Offer B
(1) Base salary
(2) Overtime compensation
(3) Moving allowance
(4) Signing bonus
(5) Job search costs already incurred
Select the job criterion that are relevant to Andy’s decision. (Points : 2)
(1), (2), (3), (4), (5)
(2), (3), (4)
(1), (3), (5)
For purposes of decision making, avoidable costs are costs that: (Points : 2)
were incurred in the past.
will be incurred in the future and differ between the alternatives.
do not differ between alternatives.
are not relevant in decision making.
All of the following are factors that could be considered in a decision to outsource a component that is currently being produced in house. Which of the following is not likely to be relevant? (Points : 2)
The book value of equipment used in making the component
The impact on employee morale
The importance of vertical integration to the company
The reliability of the supplier
Brannon Company plans to add a new item to its product line. Two possible products are under consideration. Each unit of Product A costs $12 to produce and has a contribution margin of $6, while each unit of Product B costs twice as much and has a contribution margin of $8. What is the differential revenue for this decision? (Points : 2)
Haltom Corporation has prepared its sales budget for 2010. Sales on account are expected to be $500,000 in January and $600,000 in February. Haltom generally collects 40% of its sales on account in the month of sale and 58% in the month after sale. The remaining 2% is uncollectible. Based on this information, what amount of cash should Haltom expect to collect in February 2010? (Points : 2)
Select the incorrect statement about budgeting and human behavior. (Points : 2)
People are often uncomfortable with budgets.
Budgets are constraining.
Budgets limit individual freedom in favor of an established plan.
Few people find evaluation based on budget expectations stressful.
Select the incorrect statement. (Points : 2)
Four purposes often claimed for budgeting involve planning, coordination, performance measurement, and corrective action.
In a participative budgeting system, budget information flows in one direction only, from bottom to top.
The three major categories of the master budget are operating budgets, capital budgets, and pro forma financial statements.
The accounting department normally does not coordinate the effort to establish the sales forecast.
Balfour Company estimated that its inventory purchases for January and February 2010 would be $300,000 and $370,000, respectively. The company generally pays for 40% of its inventory purchases in the month of purchase and 60% the following month. What will be the amount of cash payments for inventory in February 2010? (Points : 2)
Select the incorrect statement regarding relevant revenues. (Points : 2)
Relevant revenues differ between the alternatives being considered.
Past or future revenues may be relevant.
Relevant revenues must make a difference in the decision under consideration.
Relevant revenues are identified in the same way as relevant costs.
Select the incorrect statement regarding the human factor in the budgeting process. (Points : 2)
There is a tendency for people to be uncomfortable with budgets.
The evaluation feature of budget systems is frightening for many people.
Budgets force employees to follow the organization’s plan.
Proper handling of human relations is essential to the establishment of an effective budget system.
Which of the following budgets or schedules uses data contained in the selling and administrative expense budget? (Points : 2)
Cash payments schedule
Cash receipts schedule
Inventory purchases budget
The master budget normally covers: (Points : 2)
one to three years.