Refer to the Scenario Below to Answer the Questions That

question 112

Multiple Choice

Refer to the Scenario below to answer the questions that follow.
The Loaned Car (Scenario)
Colleen is a student,and her older brother has loaned her an old car.The car is in need of several repairs before she will feel comfortable driving it.
-Colleen's brother feels that the car is worth repairing because he has owned several cars made by the same manufacturer,and he has driven this particular car for several years.He also points out that he has invested hundreds of dollars in maintenance and repairs over the years,so it is obviously worth investing in new repairs to keep it running.Colleen's brother appears to be basing his decision on ________,but may also be making an error known as ________.

• A)intuition; anchoring effect
• B)escalation of commitment; hindsight bias
• C)satisficing; framing bias
• D)escalation of commitment; overconfidence bias
• E)intuition; sunk costs error

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Definitions:

Revenue Variance

The difference between the actual revenue earned and the budgeted or expected revenue.

Spending Variances

Differences between the budgeted amount of expense and the actual amount spent.

Customers Served

The number of customers who have purchased or utilized a service from a business within a given time period.

Planning Budget

A budget prepared for a specific level of activity; it may be adjusted or reevaluated based on the level of activity actually achieved.