1

1. Differential analysis:

   	A.	compares two courses of action by determining net income for each.
   	B.	would be used to review past performance.
   	C.	is a procedure employing the gross margin to determine the best selling price.
   	D.	is an analysis of the different costs and benefits from alternative solutions to a problem.

2 points

Question 2

1. If a company operating at less than full capacity receives a special order request with a price less than total cost, the company should reject the request.

   True

   False

2 points

Question 3

1. The Sidney Company faces a make-or-buy decision concerning a part it manufactures in-house. The product can be manufactured internally with materials costs of $24 per unit, labor of $9, fixed overhead of $6.50, and variable overhead of $6. At what dollar amount would Sidney be indifferent to making or buying this part if the fixed overhead costs would be unaffected?

   	A.	$33.00
   	B.	$39.00
   	C.	$43.50
   	D.	$24.00

2 points

Question 4

1. When using differential analysis to decide whether to eliminate certain products, segments, or customers, costs must be reclassified into those that would be eliminated or changed by the elimination and those that would not.

   True

   False

2 points

Question 5

1. Future costs that do not differ between alternatives do not need to be included in the analysis for proper decisions to be made.

   True

   False

2 points

Question 6

1. Past costs incurred to create capacity are differential costs in future make or buy decisions.

   True

   False

2 points

Question 7

1. In the contribution margin statement:

   	A.	fixed costs are deducted to determine contribution margin.
   	B.	fixed costs are deducted to determine gross margin.
   	C.	variable selling costs are deducted to determine contribution margin.
   	D.	All of the other answers are correct.

2 points

Question 8

1. Sunk costs are:

   	A.	irrelevant for decision making.
   	B.	past costs.
   	C.	costs such as the previous year's wages.
   	D.	All of the other answers are correct.

2 points

Question 9

1. Relevant costs are:

   	A.	all future costs.
   	B.	all costs.
   	C.	all past cost.
   	D.	all future costs that differ between alternatives.

2 points

Question 10

1. Many managers prefer a contribution margin income statement for management reporting purposes.

   True

   False

2 points

Question 11

1. A differential cost:

   	A.	is the same as a sunk cost.
   	B.	includes past costs.
   	C.	is equal to the difference in relevant costs between two alternatives.
   	D.	All of the other answers are incorrect.

2 points

Question 12

1. When deciding to make or buy a product, the only relevant costs are differential costs.

   True

   False

2 points

Question 13

1. Variable costs are relevant in deciding whether or not to drop a product.

   True

   False

2 points

Question 14

1. Future costs and revenues that differ between alternatives are relevant to a decision regarding those alternatives.

   True

   False

2 points

Question 15

1. When differential analysis is applied to pricing decisions, the price selected should be the price that will result in the greatest TOTAL contribution margin.

   True

   False

2 points

Question 16

1. The master budget:

   	A.	is initiated by first developing the cash budget.
   	B.	is the organization's five-year plan for financing and investing activities.
   	C.	consists of a projected income statement and a projected balance sheet, with supporting budgets and schedules.
   	D.	is prepared as the first step in developing the planned operating budget and the financial budget.

2 points

Question 17

1. The projected income statement is prepared after the projected balance sheet.

   True

   False

2 points

Question 18

1. The production budget is often dependent on the sales budget.

   True

   False

2 points

Question 19

1. The goal sought in the preparation of a flexible budget is to indicate the costs expected to be incurred at varying levels of output.

   True

   False

2 points

Question 20

1. A series of budgets for differing levels of activity for the same item is called a(n):

   	A.	financial budget.
   	B.	operating budget.
   	C.	flexible budget.
   	D.	master budget.

2 points

Question 21

1. Financial budgets do not aid management in planning.

   True

   False

2 points

Question 22

1. Although budgets are plans for the future, they are based primarily on past experience adjusted for future expectations.

   True

   False

2 points

Question 23

1. A cash budget is a plan indicating expected inflows and outflows of cash to aid in assessing short-term needs.

   True

   False

2 points

Question 24

1. Accounting data related to the past are often used in the preparation of budgets, which are plans for the future.

   True

   False

2 points

Question 25

1. A budget shows how management expects to acquire and use resources to achieve its objectives.

   True

   False

2 points

Question 26

1. The Schraeger Company has estimated that sales for next quarter would be 30,000 units. The company has a beginning finished goods inventory of 2,000 units and wishes to have finished goods inventory of 5,000 units at the end of the quarter. How many units must the company produce in order to have its desired ending inventory?

   	A.	33,000 units
   	B.	30,000 units
   	C.	37,000 units
   	D.	27,000 units

2 points

Question 27

1. Zero-based budgeting requires that managers start budgeting at point zero.

   True

   False

2 points

Question 28

1. Budgets are used in performance evaluation.

   True

   False

2 points

Question 29

1. Periodic budget reports generally compare actual data with budgeted data.

   True

   False

2 points

Question 30

1. The projected income statement is typically:

   	A.	not prepared.
   	B.	prepared after the projected balance sheet.
   	C.	prepared prior to the projected balance sheet.
   	D.	All of the other answers are incorrect.

2 points

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