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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Definitions:

Secular

Related to or concerned with worldly rather than spiritual matters; not religious or sacred.

Spiritual

Pertaining to or affecting the human spirit or soul as opposed to material or physical things.

Navajo

A Native American people of the Southwestern United States, known for their rich culture, language, and history.

Evil Magic

Practices believed to harness supernatural powers for malicious purposes, often contrasted with benign or protective magic.