MBA 620 Final Exam ACTUAL EXAM QUESTIONS WITH COMPLETE
MBA 620 Final Exam
SOLUTION GUIDE (A+ GRADED 100% VERIFIED) LATEST VERSION
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2025!!
1. Future costs that differ among competing decision al- relevant costs
ternatives (a.k.a., differential or incremental costs)
2. Revenues that differ when one alternative is selected differential revenues
over another. For example, if a company is deciding
whether to keep all customers (Alternative 1) or drop
certain less profitable customers (Alternative 2), differ-
ence between total revenue for Alternative 1 and total
revenue for Alternative 2.
3. Costs that differ when one alternative is selected differential costs
over another. For example, if a company is deciding
whether to make a product internally (Alternative 1)
or outsource production (Alternative 2), difference be-
tween costs for Alternative 1 and Alternative 2
4. Reviewing the differential revenues and costs for alter- differential analysis
native courses of action; this is used by management
to evaluate different alternatives and to select the best
course of action
5. Means a company is deciding whether to make a prod- make-or-buy decision
uct internally or buy the product from an outside firm.
Differential analysis helps managers focus solely on
the costs that are relevant to the make-or-buy deci-
sion. Variable production costs are typically differential
costs. Fixed production costs must be reviewed on a
case-by-case basis to determine which costs are differ-
ential and which are not. Managers typically select the
alternative with the lowest cost.
6. A cost that can be avoided, or eliminated, if one alter- avoidable cost
native is chosen over another (also differential costs)
, MBA 620 Final Exam
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7. How is differential analysis used in deciding whether contribution margin in-
to keep or drop product lines? come statement, income
statement, profit
A ____________ __________ _________ ___________ is pre-
pared, which includes information for each product
line and a total column for all product limes. Anoth-
er _____________ _____________ is prepared in the same
format, which excludes the product line the company
would like to drop. Decision makers select the alterna-
tive with the highest ___________
8. Can be traced directly to a product line, and are typical- direct fixed costs
ly avoidable if the product line is eliminated
9. Cannot be traced directly to a product line, and are allocated fixed costs
assigned to product lines using an allocation process.
These costs are typically not differential costs since
they are allocated to remaining products if a product
line is dropped
10. Managers often use ________ as a determining factor profit
for deciding whether to keep or drop customers and
products
11. For product line decisions, _______ and _______ are as- revenues and costs
signed to individual product lines. For customer deci-
sions, both are assigned to individual customers.
12. Is used for both product line and customer decisions contribution margin in-
to asses the profitability of various alternatives come statement
13. What two assumptions must be considered when eval- capacity and pricing
uating special order scenarios?
, MBA 620 Final Exam
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14. Acquiring or maintaining fixed assets that will be used capital expenditures
for more than a year such as buildings and equipment
15. Deciding which long-term investments to make capital budgeting
16. Decisions involve using company funds to invest in capital budgeting deci-
long-term assets such as production facilities and sions
equipment; these decisions typically involve projects
that affect cash flows of the company for many years
17. Describes the value of future cash flows (both in and present value
out) in today's dollars
18. Three steps required to evaluate investments using cash flows, rate of return
the net present value are:
1. Identify the amount and timing of the _________
_________ required over the life of the investment
2. Establish an appropriate interest rate to be used
for evaluating the investment, called the _________ ___
_________
3. Calculate and evaluate the net present value of the
investment.
19. Is the weighted average costs associated with debt cost of capital
and equity used to fund long-term investments
20. Is the rate required to get an NPV of zero for a series of internal rate of return (IRR)
cash flows; represents the time-adjusted rate of return
for the investment being considered
21. States that if the IRR is greater than or equal to the IRR decision rule
company's required rate of return (recall that this is of-
MBA 620 Final Exam
SOLUTION GUIDE (A+ GRADED 100% VERIFIED) LATEST VERSION
Study online at https://quizlet.com/_8wblqo
2025!!
1. Future costs that differ among competing decision al- relevant costs
ternatives (a.k.a., differential or incremental costs)
2. Revenues that differ when one alternative is selected differential revenues
over another. For example, if a company is deciding
whether to keep all customers (Alternative 1) or drop
certain less profitable customers (Alternative 2), differ-
ence between total revenue for Alternative 1 and total
revenue for Alternative 2.
3. Costs that differ when one alternative is selected differential costs
over another. For example, if a company is deciding
whether to make a product internally (Alternative 1)
or outsource production (Alternative 2), difference be-
tween costs for Alternative 1 and Alternative 2
4. Reviewing the differential revenues and costs for alter- differential analysis
native courses of action; this is used by management
to evaluate different alternatives and to select the best
course of action
5. Means a company is deciding whether to make a prod- make-or-buy decision
uct internally or buy the product from an outside firm.
Differential analysis helps managers focus solely on
the costs that are relevant to the make-or-buy deci-
sion. Variable production costs are typically differential
costs. Fixed production costs must be reviewed on a
case-by-case basis to determine which costs are differ-
ential and which are not. Managers typically select the
alternative with the lowest cost.
6. A cost that can be avoided, or eliminated, if one alter- avoidable cost
native is chosen over another (also differential costs)
, MBA 620 Final Exam
Study online at https://quizlet.com/_8wblqo
7. How is differential analysis used in deciding whether contribution margin in-
to keep or drop product lines? come statement, income
statement, profit
A ____________ __________ _________ ___________ is pre-
pared, which includes information for each product
line and a total column for all product limes. Anoth-
er _____________ _____________ is prepared in the same
format, which excludes the product line the company
would like to drop. Decision makers select the alterna-
tive with the highest ___________
8. Can be traced directly to a product line, and are typical- direct fixed costs
ly avoidable if the product line is eliminated
9. Cannot be traced directly to a product line, and are allocated fixed costs
assigned to product lines using an allocation process.
These costs are typically not differential costs since
they are allocated to remaining products if a product
line is dropped
10. Managers often use ________ as a determining factor profit
for deciding whether to keep or drop customers and
products
11. For product line decisions, _______ and _______ are as- revenues and costs
signed to individual product lines. For customer deci-
sions, both are assigned to individual customers.
12. Is used for both product line and customer decisions contribution margin in-
to asses the profitability of various alternatives come statement
13. What two assumptions must be considered when eval- capacity and pricing
uating special order scenarios?
, MBA 620 Final Exam
Study online at https://quizlet.com/_8wblqo
14. Acquiring or maintaining fixed assets that will be used capital expenditures
for more than a year such as buildings and equipment
15. Deciding which long-term investments to make capital budgeting
16. Decisions involve using company funds to invest in capital budgeting deci-
long-term assets such as production facilities and sions
equipment; these decisions typically involve projects
that affect cash flows of the company for many years
17. Describes the value of future cash flows (both in and present value
out) in today's dollars
18. Three steps required to evaluate investments using cash flows, rate of return
the net present value are:
1. Identify the amount and timing of the _________
_________ required over the life of the investment
2. Establish an appropriate interest rate to be used
for evaluating the investment, called the _________ ___
_________
3. Calculate and evaluate the net present value of the
investment.
19. Is the weighted average costs associated with debt cost of capital
and equity used to fund long-term investments
20. Is the rate required to get an NPV of zero for a series of internal rate of return (IRR)
cash flows; represents the time-adjusted rate of return
for the investment being considered
21. States that if the IRR is greater than or equal to the IRR decision rule
company's required rate of return (recall that this is of-
