1. Which of the following is not a step in management's decision-making process?
a. Identify the problem and assign responsibility.
b. Determine and evaluate possible courses of action.
c. Make a decision.
d. Prepare financial statements.
2. If revenues are $315,000 under alternative A and $324,000 under alternative B, and costs are $285,000 for A and $306,000 for B, then using the basic approach in incremental analysis, incremental revenues, costs, and net income, in comparing B to A are respectively
a. $9,000, $(21,000), $(12,000).
b. $(9,000), $21,000, $12,000.
c. $9,000, $21,000, $12,000.
d. $(9,000), $(21,000), $(12,000).
3. The cost to manufacture an unfinished unit is $120 ($90 variable, $30 fixed). The selling price per unit is $150. The company has unused productive capacity and has determined that units could be finished and sold for $195 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit?
4. The potential benefit that may be obtained from following an alternative course of action is called
a. opportunity benefit.
b. opportunity cost.
c. relevant cost.
d. sunk cost.
5. In a make or buy decision, the relevant costs include each of the following except the
a. variable manufacturing costs that will be saved.
b. fixed manufacturing costs that can be eliminated.
c. opportunity costs.
d. each of the above is a relevant cost.
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