Question two (2) to thirty three (33) is multiple choice, please select the most correct alternative, each question is 1 mark: [30]

12. Which of the following best describes a relevant cost?

A. A cost that changes with the volume of output

B. A cost that has already been incurred and cannot be changed

C. A cost that differs between decision alternatives

D. A cost that remains constant regardless of the level of output

13. Which of the following would be a relevant cost in a make-or-buy decision?

A. Depreciation on equipment already purchased

B. Direct materials needed to produce the product

C. Fixed overhead that will be incurred regardless of the decision

D. The original cost of equipment that will be used in the production process

14. Opportunity costs in decision making

A. Are not considered as they do not involve any cash outlay

B. Are irrelevant as they pertain to benefits that could have been received from an alternative not chosen

C. Are relevant as they pertain to benefits that could have been received from an alternative not

chosen

D. Always refer to past costs

15. Linear programming is best described as:

A. A methodology used to allocate limited resources among competing activities in an optimal way.

B. A method for determining the optimal product mix when only two products are being

produced.

C. A mathematical approach to solve problems of probability.

D. A programming language for developing financial models.

16. In a linear programming problem, what do the constraints represent?

A. The decision variables that need to be determined.

B. The mathematical expressions that describe the objective of the problem.

C. The limits on the resources or conditions that must be satisfied.

D. The optimal solution to the problem.

17. The Feasible Region in a linear programming context refers to

A. The area of the graph where the decision variables are not feasible.

B. The area of the graph that satisfies all constraints.

C. The optimal value of the decision variables.

D. The mathematical formulation of the constraints.

18. What type of problems can't be solved using linear programming?

A. Maximizing profits given certain constraints

B. Minimizing costs given certain constraints

C. Determining the optimal allocation of resources

D. Problems where the relationship between variables is nonlinear

19. The simplex method in linear programming is

A. A graphical solution method.

B. An algorithm for finding the optimal solution when there are more than two decision variables. C. A technique for modelling complex real-world situations.

D. An iterative method to find the most profitable product-mix.

20. Which of the following best defines transfer pricing?

A. The price charged for products sold to external customers.

B. The price charged for products sold between divisions within the same company.

C. The price charged for products sold to external suppliers.

D. The price charged for products sold in international markets.

21. Which of the following is a potential disadvantage of using market-based transfer prices?

A. They can lead to suboptimal decision making if market prices are not perfectly competitive.

B. They can be easily manipulated by division managers.

C. They don't reflect the cost structure of the divisions.

D. They can lead to higher taxes in multinational corporations.

22. What is the primary purpose of transfer pricing?

A. To minimize the company's overall tax liability.

B. To establish benchmarks for the company's external sales.

C. To facilitate decision making and performance evaluation within the company.

D. To set prices for the company's products in external markets.

23. Which of the following is not a method of transfer pricing?

A. Market-Based Transfer Pricing

B. Cost-Based Transfer Pricing

C. Negotiated Transfer Pricing

D. Consumer-Based Transfer Pricing

24. Which of the following is a potential disadvantage of using cost-based transfer prices?

A. It can lead to suboptimal decision making if the selling division has no control over costs.

B. It can be difficult to calculate due to disputes over which costs to include.

C. It can discourage divisions from controlling costs.

D. All of the above.

25. Which of the following is not typically used as a performance measure in divisional performance evaluation?

A. Return on Investment (ROI)

B. Residual Income (RI)

C. Economic Value Added (EVA)

D. Current Ratio

26. Which of the following best describes Return on Investment (ROI) as a performance measure?

A. It measures the profit earned for each dollar of sales.

B. It measures the profit earned for each dollar of investment.

C. It measures the profit earned after deducting the cost of capital.

D. It measures the economic profit generated over and above the required return on capital.

27. Which performance measure considers both the division's profit and the size of its invested capital?

A. Gross Profit Margin

B. Residual Income

C. Return on Investment

D. Economic Value Added

28. A problem with using ROI as a performance measure is that

A. It doesn't consider the division's size.

B. It discourages division managers from investing in profitable projects if those projects would decrease the division's ROI.

C. It's complicated and hard to understand.

D. It doesn't take into account the division's cost structure.

29. What does the term 'residual income' refer to in divisional performance evaluation?

A. The income remaining after all direct and indirect costs have been deducted.

B. The income generated that exceeds a division's target ROI.

C. The division's net income minus a charge for the cost of capital employed in the division.

D. The division's gross income minus its operating expenses.

30. In the context of contract costing, the term retention money refers to

A. Money held back by the customer until the completion of the contract.

B. Money that the contractor must pay to the customer for late completion.

C. Money that is retained by the contractor as profit.

D. Money that is set aside for potential cost overruns.

31. Which of the following is not a common feature of an escalation clause in a contract?

A. It allows for adjustments in the contract price due to changes in costs.

B. It protects the contractor from unforeseen increases in costs.

C. It guarantees the contractor a minimum level of profit.

D. It locks in the contract price for the duration of the contract.

32. In contract costing, when is profit typically recognized?

A. Only upon completion of the contract

B. As the contract progresses and work is completed

C. Only when the contract is terminated before completion

D. Profit recognition is not associated with contract costing

33. Which of the following is not a feature of contract costing?

A. Each contract is treated as a separate cost unit.

B. Costs are accumulated for each contract separately.

C. A contract is usually a short-term project.

D. Profit is recognized as the contract progresses.