Question 1

When considering a new project, depreciation of the fixed assets to be used in the project will be relevant cash flows.

1. True
2. False

Question 2

When choosing between alternative projects, costs common to all projects will be relevant.

1. True
2. False

Question 3

A manager is considering investing in a new machine. Which of the following costs is not relevant?

1. Cash price of the machine

Question 3

A manager is considering investing in a new machine. Which of the following costs is not relevant?

		Cash price of the machine
		Discount offered if machine paid for within 30 days
		Depreciation of current machine
		Installation cost of new machine

Question 4

A business is considering investing 200,000 in a new production line. The new production line is expected to generate 50,000 profit a year for the next 10 years. The warehouse space required to build the new production line is currently rented out to a supplier who pays 12,000 rent per annum. What is the opportunity cost associated with the new production line?

Question 5

Which of the following is not a limitation of the relevant cost approach?

		Cash flows non relevant short term may become relevant longer term
		The cost of alternatives can be difficult to estimate
		Non financial factors may be important
		Opportunity costs are considered when making a decision

Question 6

When one company dominates a market, the company is said to be the market leader.

1. True
2. False

Question 7

Using the full cost pricing approach, calculate the price of the following item:

Cost 45

% mark up 7%

Question 8

Using sales margin pricing approach, what is the sales margin for the following item:

Price 79

% margin 15%

Question 9

Company's are free to set their own prices however, other factors need to be taken into consideration. Which of the following will impact the price of a global company's product:

(i) Demand for the product

(ii) Competitor prices

(iii) The product's reputation

(iv) Foreign exchange rates

1. (I),(II) and(iii)
2. (I) and (iii)
3. All of the above
4. (II)only

Question 10

Which of the following is not an attitude to risk?

		Risk seeker
		Risk averse
		Risk neutral
		Risk opposed

Question 11

Given the following data, what is the best outcome?

Demand

Best 15,000

Most likely 12,000

Worst 10,000

Cost

Best 5

Most likely 7

Worst 10

Question 12

Objective probabilities are based on opinions

1. True
2. False

Question 13

What is the joint probability give the following information?

Probability of event being cancelled 0.1

Probability of getting sick and missing the event 0.1

Question 14

Calculate the sensitivity factor given the following data:

Current profit 55,000, forecast profit 75,000

Change in profit a result of a 10% change in demand

Question 15

Only financial factors should impact price

1. True
2. False