Do you agree that the cost benefit rule conflicts with our traditional principles of
“never give up” and “go for it”?
1 2
50%50%1. Yes
2. No
Do all companies such as RealNetworks, Inc. use cost-benefit analysis for decision-
making?
1 2
50%50%1. Yes
2. No
Do you think that the cost-benefit approach to help in selecting alternatives is a complex
process?
1 2
50%50%1. Yes
2. No
Do you think that computers and software can help in performing cost-benefit and
differential analysis for decision-making?
1 2
50%50%1. Yes
2. No
Do companies like RealNetworks, Inc. ever choose the wrong alternative using cost-benefit analysis and differential analysis?
1 2
50%50%1. Yes
2. No
Differential cost is the amount of increase or decrease that is expected from a course of
action as compared with an alternative.
1 2
50%50%1. True
2. False
When using differential analysis to lower selling prices for special short-run decisions, the minimum short-run
price is set high enough to cover all variable costs.
1 2
50%50%1. True
2. False
In a demand-based method, if there is a high demand for the product, then the price
may be set low.
1 2
50%50%1. True
2. False
Managers using the cost-plus methods price the product in order to achieve a target
profit.
1 2
50%50%1. True
2. False
A production bottleneck occurs at the point in the process where the demand for the company’s
product exceeds the ability to produce the product.
1 2
50%50%1. True
2. False
Costs that have been incurred in the past and are not relevant to the decision are
called
1 2 3 4
25% 25%25%25%
1. fixed costs
2. variable costs
3. sunk costs
4. committed costs
The analysis that focuses on the effect of alternative courses of action on the relevant
revenues and costs is called
1 2 3 4
25% 25%25%25%
1. variance analysis
2. income statement analysis
3. performance analysis
4. differential analysis
Differential analysis can be used to analyze which of the following alternatives?
1 2 3 4
25% 25%25%25%1. Leasing or selling equipment
2. Discontinuing an unprofitable segment
3. Manufacturing or purchasing a needed part
4. All of these choices
The amount of income that is foregone from an alternative use of an asset, such as cash,
is called a(n)
1 2 3 4
25% 25%25%25%
1. opportunity cost
2. sunk cost
3. fixed cost
4. contribution margin
Which of the following is not a cost concept used in applying the cost-plus approach?
1 2 3 4
25% 25%25%25%
1. Total cost
2. Sunk cost
3. Product cost
4. Variable cost
Using the total cost concept, all the cost of manufacturing a product
1 2 3 4
25% 25%25%25%
1. less the selling and administrative expenses gives the cost amount to which the markup is deducted
2. plus the selling and administrative expenses are included in the cost amount to which the markup is deducted
3. plus the selling and administrative expenses are included in the cost amount to which the markup is added
4. less the selling and administrative expenses gives the cost amount to which the markup is added
The formula for the markup percentage under the product cost concept is
1 2 3 4
25% 25%25%25%
1. desired profit divided by total costs
2. desired profit plus total selling and administrative expenses divided by total manufacturing costs
3. desired profit plus total fixed costs divided by total variable costs
4. desired profit less total selling and administrative expenses divided by total manufacturing costs
Which of the following is not a cost-plus method?
1 2 3 4
25% 25%25%25%
1. Total cost concept
2. Product cost concept
3. Variable cost concept
4. Demand-based method
A method that combines market-based pricing with a cost-reduction emphasis is
1 2 3 4
25% 25%25%25%
1. target costing
2. activity-based costing
3. variable costing
4. product costing
The theory of constraints (TOC) is a manufacturing strategy that focuses on
1 2 3 4
25% 25%25%25%1. reducing variable
costs for products
2. reducing the influence of bottlenecks on a process
3. maximizing operating efficiency in the manufacturing process
4. earning the maximum net income for a company
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