Management Accountants Are Frequently Asked to Analyze Various Decision Situations

question 135

Multiple Choice

Management accountants are frequently asked to analyze various decision situations including the following:

(1) Alternative uses of plant space, to be considered in a make/buy decision.
(2) Joint production costs incurred, to be considered in a sell-at-split-off-point-versus-process-further decision.
(3) Research and development (R&D) costs incurred in prior months, to be considered in a new-product-introduction decision.
(4) The cost of a special device that is necessary if a special sales order is accepted.
(5) The cost of obsolete inventory to be considered in a keep-versus-disposal decision.

The costs described in situations 1 and 4 above are:

• A) Prime costs.
• B) Sunk costs.
• C) Discretionary costs.
• D) Relevant costs.
• E) Fully-absorbed costs.

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