ACCT 292 Chapter 11 - Differential Analysis -The Key to Decision Making Test Questions and
Answers Already Passed Latest Update 2025-2026
In the context of decision making, every decision involves choosing from among at least two
alternatives. - Answers True
Costs and benefits that always differ between alternatives are ______ costs and benefits. -
Answers relevant
Differential revenue is an example of a(n) ______ benefit. - Answers relevant
A cost that can be eliminated by choosing one alternative over another is a(n) ________ cost. -
Answers avoidable
Costs that have already been incurred and cannot be avoided regardless of what a manager
decides to do are ______ costs. - Answers sunk
The first step in decision making is to ______. - Answers define the alternatives
Irrelevant costs include ______. - Answers sunk costs
future costs that do not differ between alternatives
Costs and benefits that should be ignored when making decisions are called ______ costs and
benefits. - Answers irrelevant
Opportunity costs are not found in accounting records because they are not relevant to
decisions. - Answers False
An increase in cost between two alternatives is a(n) _______ cost. - Answers incremental
When planning a road trip, the ______ is a sunk cost and should be ignored. - Answers original
cost of the car
A cost that can be eliminated in whole or in part by choosing one alternative over another is a(n)
______ cost. - Answers avoidable
When planning a trip and deciding to drive your car or take the train, gasoline is a(n) ______ cost.
- Answers relevant
A cost that has already been incurred and cannot be avoided regardless of what a manager
decides to do is referred to as a(n) _______ cost. - Answers sunk
When making a decision, irrelevant items are included in the analysis of both alternatives when
using ______. - Answers the total cost approach only
Which of the following should not be included in the analysis when making a decision? -
Answers Sunk costs
, Non-differential future costs
In order to prevent confusion and keep attention focused on critical information, it is desirable
to ______. - Answers isolate relevant costs from irrelevant costs
The potential benefit given up when selecting one alternative over another is a(n) ______ cost. -
Answers opportunity
Potential advantages of dropping a product line or other segment include ______. - Answers an
overall increase in net operating income
avoiding more fixed costs than the company loses in contribution margin
The accounting depreciation of an existing asset is relevant to decisions. - Answers False
When making a product line decision, a company may focus on lost contribution margin and
avoidable fixed costs or prepare comparative ______. - Answers income statements
When planning a trip and making a decision to drive or take the train, the cost of car repairs and
maintenance is a(n) ______ cost. - Answers relevant
Which of the following can make a product line look less profitable than it really is? - Answers
Allocated common fixed costs
When considering decision alternatives, both relevant and irrelevant costs are included when
using the ________ cost approach. - Answers total
A decision to carry out one of the activities in the value chain internally, rather than to purchase
externally from a supplier, is called a(n) _______ or ______ decision. - Answers make, buy
Mingling irrelevant and relevant costs may cause confusion and distract attention from critical
information. - Answers True
Being less dependent on suppliers and realizing profits from the parts and materials that it is
"making" rather than "buying," as well as profits from its regular operations, are advantages of
_______ ________. - Answers vertical integration
A business segment should only be dropped if a company can save more in ______ costs than it
loses in contribution margin. - Answers fixed
Andrews Co. can purchase 20,000 units of Part XYZ from a supplier for $18 per part. Andrews'
per unit manufacturing costs for 20,000 units is as follows:
If the part is purchased, the supervisor position will be eliminated. The special equipment has
no other use and no salvage value. Total allocated fixed overhead would be unaffected by the
Answers Already Passed Latest Update 2025-2026
In the context of decision making, every decision involves choosing from among at least two
alternatives. - Answers True
Costs and benefits that always differ between alternatives are ______ costs and benefits. -
Answers relevant
Differential revenue is an example of a(n) ______ benefit. - Answers relevant
A cost that can be eliminated by choosing one alternative over another is a(n) ________ cost. -
Answers avoidable
Costs that have already been incurred and cannot be avoided regardless of what a manager
decides to do are ______ costs. - Answers sunk
The first step in decision making is to ______. - Answers define the alternatives
Irrelevant costs include ______. - Answers sunk costs
future costs that do not differ between alternatives
Costs and benefits that should be ignored when making decisions are called ______ costs and
benefits. - Answers irrelevant
Opportunity costs are not found in accounting records because they are not relevant to
decisions. - Answers False
An increase in cost between two alternatives is a(n) _______ cost. - Answers incremental
When planning a road trip, the ______ is a sunk cost and should be ignored. - Answers original
cost of the car
A cost that can be eliminated in whole or in part by choosing one alternative over another is a(n)
______ cost. - Answers avoidable
When planning a trip and deciding to drive your car or take the train, gasoline is a(n) ______ cost.
- Answers relevant
A cost that has already been incurred and cannot be avoided regardless of what a manager
decides to do is referred to as a(n) _______ cost. - Answers sunk
When making a decision, irrelevant items are included in the analysis of both alternatives when
using ______. - Answers the total cost approach only
Which of the following should not be included in the analysis when making a decision? -
Answers Sunk costs
, Non-differential future costs
In order to prevent confusion and keep attention focused on critical information, it is desirable
to ______. - Answers isolate relevant costs from irrelevant costs
The potential benefit given up when selecting one alternative over another is a(n) ______ cost. -
Answers opportunity
Potential advantages of dropping a product line or other segment include ______. - Answers an
overall increase in net operating income
avoiding more fixed costs than the company loses in contribution margin
The accounting depreciation of an existing asset is relevant to decisions. - Answers False
When making a product line decision, a company may focus on lost contribution margin and
avoidable fixed costs or prepare comparative ______. - Answers income statements
When planning a trip and making a decision to drive or take the train, the cost of car repairs and
maintenance is a(n) ______ cost. - Answers relevant
Which of the following can make a product line look less profitable than it really is? - Answers
Allocated common fixed costs
When considering decision alternatives, both relevant and irrelevant costs are included when
using the ________ cost approach. - Answers total
A decision to carry out one of the activities in the value chain internally, rather than to purchase
externally from a supplier, is called a(n) _______ or ______ decision. - Answers make, buy
Mingling irrelevant and relevant costs may cause confusion and distract attention from critical
information. - Answers True
Being less dependent on suppliers and realizing profits from the parts and materials that it is
"making" rather than "buying," as well as profits from its regular operations, are advantages of
_______ ________. - Answers vertical integration
A business segment should only be dropped if a company can save more in ______ costs than it
loses in contribution margin. - Answers fixed
Andrews Co. can purchase 20,000 units of Part XYZ from a supplier for $18 per part. Andrews'
per unit manufacturing costs for 20,000 units is as follows:
If the part is purchased, the supervisor position will be eliminated. The special equipment has
no other use and no salvage value. Total allocated fixed overhead would be unaffected by the
