Exam Accounting Test Bank Questions Test 2 Questions and Answers 2023

Exam

Accounting Test Bank Questions Test 2 Questions and Answers 2023

CHAPTER STUDY OBJECTIVES 1. Identify the steps in management's decision-making process. Management's decision-making process consists of (a) identifying the problem or opportunity, (b) assigning responsibility for the decision, (c) determining possible courses of action, (d) developing data relevant to each course of action, (e) making the decision, and (f) reviewing the results of the decision. 2. Describe the concept of incremental analysis. Incremental analysis identifies financial data that change under alternative courses of action. These data are relevant to the decision because they will vary in the future among the possible alternatives. 3. Identify the relevant costs in accepting an order at a special price. The relevant information in accepting an order at a special price is the difference between the variable manufacturing costs to produce the special order and expected revenues. 4. Identify the relevant costs in a make-or-buy decision. In a make-or-buy decision, the relevant costs are (a) the variable manufacturing costs that will be saved, (b) the purchase price, and (c) opportunity costs. 5. Give the decision rule for whether to sell or process materials further. The decision rule for whether to sell or process materials further is: Process further as long as the incremental revenue from processing exceeds the incremental processing costs. 6. Identify the factors to consider in retaining or replacing equipment. The factors to consider in determining whether equipment should be retained or replaced are the effects on variable costs and the cost of the new equipment. Also, any disposal value of the existing asset must be considered. 7. Explain the relevant factors in whether to eliminate an unprofitable segment. In deciding whether to eliminate an unprofitable segment, determine the contribution margin, if any, produced by the segment and the disposition of the segment's fixed expenses. . . . . . . ..