Answered: The cost of inventory currently owned…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. The cost of inventory currently owned by a firm is an example of a(n):

a. opportunity cost.

b. sunk cost.

c. relevant cost.

d. differential cost.

e. future cost

2. The City of Miami is about to replace an old fire truck with a new vehicle in an effort to save maintenance and other operating costs. Which of the following items, all related to the transaction, would be considered in the decision?

a. Purchase price of the new vehicle.

b. Purchase price of the old vehicle.

c. savings in operating costs as a result of the new vehicle.

d. Proceeds from disposal of the old vehicle.

3. The book value of the equipment currently owned by a firm is an example of a(n):

a. future cost.

b. differential cost.

c. comparative cost.

d. opportunity cost.

e. sunk cost.

4. An accounting information system should be designed to provide information that is useful. To be useful the information must be:

a. qualitative rather than quantitative.

b. unique and unavailable through other sources.

c. historical in nature and not purport to predict the future.

d. marginal between two alternatives.

e. relevant, accurate, and timely.

5. Factors in a decision problem that cannot be expressed in numerical terms are:

a. qualitative in nature.

b. quantitative in nature.

c. predictive in nature.

d. sensitive in nature.

e. uncertain in nature.

6. An opportunity cost may be described as:

a. a foregone benefit.

b. a historical cost.

c. a specialized type of variable cost.

d. a specialized type of fixed cost.

7. Consider which of the above costs is relevant to the decision situation?

a. The cost of existing inventory, in a keep vs. disposal decision.

b. The cost of special electrical wiring, in an equipment acquisition decision.

c. The salary of a supervisor who will be transferred elsewhere in the organization, d. in a department-closure decision.

8. The term "opportunity cost" is best defined as:

a. the amount of money paid for an item.

b. the amount of money paid for an item, taking inflation into account.

c. the amount of money paid for an item, taking possible discounts into account.

d. the benefit associated with a rejected alternative when making a choice.

9. At which step or steps in the decision-making process do qualitative considerations generally have the greatest impact?
a. Specifying the criterion and identifying the alternatives.

b. Developing a decision model.

c. Collecting the data.

d. Making a decision.

e. Identifying the alternatives

10. Which of the following costs can be ignored when making a decision?
a. Opportunity costs.

b. Differential costs.

c. Sunk costs.

d. Relevant costs.

11. Managerial accountants:
a. rarely become involved in an organization's decision-making activities.

b. make decisions that focus solely on an organization's accounting matters.

c. collect data and provide information so that decisions can be made.

d. often serve as a cross-functional team member, making a wide range of decisions.

e. become involved in activities "C" and "D."

12. Which of the following best defines the concept of a relevant cost?

a. A past cost that is the same among alternatives.

b. A past cost that differs among alternatives.

c. A future cost that is the same among alternatives.

d. A future cost that differs among alternatives.

e. A cost that is based on past experience.

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