CHAPTER 5
MANAGEMENT ACCOUNTING INFORMATION
FOR ACTIVITY AND PROCESS DECISIONS

TRUE/FALSE

1. Sunk costs are usually relevant costs for decision making. a. True b. False

2. An example of a sunk cost is the amount of a guaranteed contract that has not yet been paid. a b. False

3. Personal employee responses are not critical considerations for the business decision maker. a. True b. False

4. For decision-making, differential costs assist in choosing between alternatives. a. True b. False

5. For a particular decision, differential revenues and costs are always relevant. a. True b. False

6. A cost may be relevant for one decision, but not relevant for a different decision. a. True b. False

7. Avoidable costs are eliminated when a product is outsourced. a. True b. False

8. In make-or-buy decisions, the suppliers’ reputation for quality and service is not a relevant quantitative factor. a. True b. False

9. For one-time-only special orders, variable costs may be relevant but not fixed costs. a. True b. False 10. Bid prices and costs that are relevant for regular orders are the same costs that are relevant for one-time-only special orders. a. True b. False

11. When opportunity costs exist, they are always relevant. a. True b. False

12. Depreciation expenses allocated to a product line is a relevant cost when deciding to discontinue that product. a. True b. False

13. When replacing an old machine with a new machine, the book value of the old machine is a relevant cost. a. True b. False

14. If a company is deciding whether to outsource a part, business-sustaining costs are always unavoidable. a. True b. False

15. Sometimes qualitative factors are the most important factors in make-or-buy decisions. a. True b. False

16. If a company is deciding whether to outsource a