IU A100 Exam 1 Questions with Verified Answers
|2026/2027 Update | A+ Graded
In the context of a make or buy decision which of the following are relevant costs? - Answer -
total product costs per unit
Return on Investment ROI - Answer -Operating Income
----------------------------
Average Operating Assets
Gross Profit - Answer -revenue - cost of goods sold
Relevant Costs (avoidable costs) - Answer -direct materials to make the component
Irrelevant Costs (unavoidable costs) - Answer -insurance expense on the factory building
Opportunity Costs - Answer -potential benefits given up when a company choses one
alternative over another
1|Page
, Decentralization - Answer -allows lower level managers to make key decisions pertaining to
their responsibilities
Benefits of Decentralization - Answer -1. lead to more timely decisions
2. managers to be more motivated
3. "ownership" in organization
Negatives of Decentralization - Answer -1. duplication of activities
2. managers lack goal congruence
RI Residual Income - Answer -net operating income-(minimum return rate x AOA)
Managerial Accounting - Answer -accounting used to provide information and analyses to
managers inside the organization to assist them in decision making
What three categories go into Product Costs? - Answer -1. Direct Materials-raw materials that
go directly into the product
2. Direct Labor-all wages and benefits for employees working on the product
3. Manufacturing Overhead-utilities, insurance
What are examples of Period Costs? - Answer -1. selling expenses-advertising, marketing
2|Page
|2026/2027 Update | A+ Graded
In the context of a make or buy decision which of the following are relevant costs? - Answer -
total product costs per unit
Return on Investment ROI - Answer -Operating Income
----------------------------
Average Operating Assets
Gross Profit - Answer -revenue - cost of goods sold
Relevant Costs (avoidable costs) - Answer -direct materials to make the component
Irrelevant Costs (unavoidable costs) - Answer -insurance expense on the factory building
Opportunity Costs - Answer -potential benefits given up when a company choses one
alternative over another
1|Page
, Decentralization - Answer -allows lower level managers to make key decisions pertaining to
their responsibilities
Benefits of Decentralization - Answer -1. lead to more timely decisions
2. managers to be more motivated
3. "ownership" in organization
Negatives of Decentralization - Answer -1. duplication of activities
2. managers lack goal congruence
RI Residual Income - Answer -net operating income-(minimum return rate x AOA)
Managerial Accounting - Answer -accounting used to provide information and analyses to
managers inside the organization to assist them in decision making
What three categories go into Product Costs? - Answer -1. Direct Materials-raw materials that
go directly into the product
2. Direct Labor-all wages and benefits for employees working on the product
3. Manufacturing Overhead-utilities, insurance
What are examples of Period Costs? - Answer -1. selling expenses-advertising, marketing
2|Page
