Refer to the Scenario Below to Answer the Following Questions

question 3

Multiple Choice

Refer to the scenario below to answer the following questions.
Decision-making Biases (Scenario)
Frank is president of Mega Manufacturing, a Canadian company that makes automobile parts. Sales and profits are down sharply this quarter, and Frank needs to analyze the series of events that have led to the poor performance. Frank begins by reviewing his recent interactions with Mike, the vice-president of sales.
-Mike advised Frank that he would be taking his newest sales executive, Eric, along on the trip to the Japanese auto maker's headquarters in Tokyo. When Frank asked how Eric was hired, Mike said, "Eric went to the same university as me, so I knew he had to be good!" Mike's comment demonstrates which of the following?

• A) selective perception bias
• B) hindsight bias
• C) self-serving bias
• D) sunk costs error
• E) escalation of commitment

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption or the wear and tear over time.

Long-Term Debt

Loans and financial obligations lasting more than one year, used to finance a company's operations or expansions.

Direct Approach

A method in financial accounting that involves reporting major classes of gross cash receipts and payments, providing a clear view of a company's cash flow.

Indirect Approach

A method for preparing the cash flow statement where net income is adjusted for non-cash transactions, deferred taxes, and changes in working capital.