Management Accountants Are Frequently Asked to Analyze Various Decision Situations

question 136

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-versus-process-further decision.
(3) Research and development (R&D) costs incurred in prior months, to be considered in a 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 2, 3, and 5 above are:

• A) Prime costs.
• B) Sunk costs.
• C) Discretionary costs.
• D) Relevant costs.
• E) Differential costs.

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Definitions:

Trust or Mistrust

A fundamental psychological choice or belief, especially in childhood, that shapes an individual's ability to engage and believe in the reliability of others.

Coping

The process of managing external and internal demands that are perceived as taxing or exceeding the resources of the person.

Normal Development

The typical progression through various cognitive, emotional, and social stages as an individual grows.

Conflicts

Situations or internal states where incompatible objectives, beliefs, or behaviors lead to a state of tension.