MBA 620 Final Exam Actual Exam 2026 | Complete
Questions and Correct Answers | Verified Answers | Just
Released
Question 1
Future costs that differ among competing decision alternatives are also
known as:
A) Sunk costs
B) Irrelevant costs
C) Relevant costs
D) Fixed costs
E) Historical costs
Correct Answer: C) relevant costs
Rationale: Relevant costs are future costs that differ among
competing decision alternatives (a.k.a., differential or incremental
costs).
Question 2
Revenues that differ when one alternative is selected over another are
called:
A) Total revenues
B) Opportunity revenues
C) Incremental revenues
D) Differential revenues
E) Fixed revenues
Correct Answer: D) differential revenues
Rationale: Differential revenues are revenues that differ when one
alternative is selected over another.
Question 3
Costs that differ when one alternative is selected over another are called:
A) Sunk costs
B) Avoidable costs
C) Incremental costs
,D) Differential costs
E) Allocated costs
Correct Answer: D) differential costs
Rationale: Differential costs are costs that differ when one alternative
is selected over another.
Question 4
The review of differential revenues and costs for alternative courses of
action, used by management to evaluate different alternatives and to select
the best course of action, is known as:
A) Cost-benefit analysis
B) Variance analysis
C) Differential analysis
D) Budgetary control
E) Break-even analysis
Correct Answer: C) differential analysis
Rationale: Differential analysis is reviewing the differential revenues
and costs for alternative courses of action; this is used by
management to evaluate different alternatives and to select the
best course of action.
Question 5
When a company decides whether to make a product internally or buy it from
an outside firm, this is referred to as a:
A) Special order decision
B) Keep or drop decision
C) Capital budgeting decision
D) Make-or-buy decision
E) Production outsourcing decision
Correct Answer: D) make-or-buy decision
Rationale: A make-or-buy decision means a company is deciding
,whether to make a product internally or buy the product from an
outside firm.
Question 6
In a make-or-buy decision, which type of cost is typically differential?
A) Fixed production costs
B) Allocated fixed costs
C) Variable production costs
D) Sunk costs
E) Depreciation costs
Correct Answer: C) Variable production costs
Rationale: In a make-or-buy decision, variable production costs are
typically differential costs.
Question 7
A cost that can be avoided, or eliminated, if one alternative is chosen over
another, is also known as a differential cost and is called an:
A) Allocated cost
B) Sunk cost
C) Unavoidable cost
D) Avoidable cost
E) Opportunity cost
Correct Answer: D) avoidable cost
Rationale: An avoidable cost is a cost that can be avoided, or
eliminated, if one alternative is chosen over another (also
differential costs).
Question 8
When deciding whether to keep or drop product lines, what type of income
statement is prepared both for each product line and with a total column,
and then again excluding the product line to be dropped?
A) Sales budget
B) Production budget
, C) Budgeted income statement
D) Contribution margin income statement
E) Operating expense statement
Correct Answer: D) contribution margin income statement
Rationale: A contribution margin income statement is prepared,
which includes information for each product line and a total column
for all product lines. Another income statement is prepared in the
same format, which excludes the product line the company would
like to drop. Decision makers select the alternative with the highest
profit.
Question 9
In a decision to keep or drop product lines, managers select the alternative
with the highest:
A) Revenue
B) Cost
C) Profit
D) Sales volume
E) Contribution margin ratio
Correct Answer: C) profit
Rationale: Decision makers select the alternative with the highest
profit when deciding whether to keep or drop product lines.
Question 10
Costs that can be traced directly to a product line and are typically avoidable
if the product line is eliminated are called:
A) Allocated fixed costs
B) Common fixed costs
C) Direct fixed costs
D) Variable costs
E) Sunk costs
Correct Answer: C) direct fixed costs
Questions and Correct Answers | Verified Answers | Just
Released
Question 1
Future costs that differ among competing decision alternatives are also
known as:
A) Sunk costs
B) Irrelevant costs
C) Relevant costs
D) Fixed costs
E) Historical costs
Correct Answer: C) relevant costs
Rationale: Relevant costs are future costs that differ among
competing decision alternatives (a.k.a., differential or incremental
costs).
Question 2
Revenues that differ when one alternative is selected over another are
called:
A) Total revenues
B) Opportunity revenues
C) Incremental revenues
D) Differential revenues
E) Fixed revenues
Correct Answer: D) differential revenues
Rationale: Differential revenues are revenues that differ when one
alternative is selected over another.
Question 3
Costs that differ when one alternative is selected over another are called:
A) Sunk costs
B) Avoidable costs
C) Incremental costs
,D) Differential costs
E) Allocated costs
Correct Answer: D) differential costs
Rationale: Differential costs are costs that differ when one alternative
is selected over another.
Question 4
The review of differential revenues and costs for alternative courses of
action, used by management to evaluate different alternatives and to select
the best course of action, is known as:
A) Cost-benefit analysis
B) Variance analysis
C) Differential analysis
D) Budgetary control
E) Break-even analysis
Correct Answer: C) differential analysis
Rationale: Differential analysis is reviewing the differential revenues
and costs for alternative courses of action; this is used by
management to evaluate different alternatives and to select the
best course of action.
Question 5
When a company decides whether to make a product internally or buy it from
an outside firm, this is referred to as a:
A) Special order decision
B) Keep or drop decision
C) Capital budgeting decision
D) Make-or-buy decision
E) Production outsourcing decision
Correct Answer: D) make-or-buy decision
Rationale: A make-or-buy decision means a company is deciding
,whether to make a product internally or buy the product from an
outside firm.
Question 6
In a make-or-buy decision, which type of cost is typically differential?
A) Fixed production costs
B) Allocated fixed costs
C) Variable production costs
D) Sunk costs
E) Depreciation costs
Correct Answer: C) Variable production costs
Rationale: In a make-or-buy decision, variable production costs are
typically differential costs.
Question 7
A cost that can be avoided, or eliminated, if one alternative is chosen over
another, is also known as a differential cost and is called an:
A) Allocated cost
B) Sunk cost
C) Unavoidable cost
D) Avoidable cost
E) Opportunity cost
Correct Answer: D) avoidable cost
Rationale: An avoidable cost is a cost that can be avoided, or
eliminated, if one alternative is chosen over another (also
differential costs).
Question 8
When deciding whether to keep or drop product lines, what type of income
statement is prepared both for each product line and with a total column,
and then again excluding the product line to be dropped?
A) Sales budget
B) Production budget
, C) Budgeted income statement
D) Contribution margin income statement
E) Operating expense statement
Correct Answer: D) contribution margin income statement
Rationale: A contribution margin income statement is prepared,
which includes information for each product line and a total column
for all product lines. Another income statement is prepared in the
same format, which excludes the product line the company would
like to drop. Decision makers select the alternative with the highest
profit.
Question 9
In a decision to keep or drop product lines, managers select the alternative
with the highest:
A) Revenue
B) Cost
C) Profit
D) Sales volume
E) Contribution margin ratio
Correct Answer: C) profit
Rationale: Decision makers select the alternative with the highest
profit when deciding whether to keep or drop product lines.
Question 10
Costs that can be traced directly to a product line and are typically avoidable
if the product line is eliminated are called:
A) Allocated fixed costs
B) Common fixed costs
C) Direct fixed costs
D) Variable costs
E) Sunk costs
Correct Answer: C) direct fixed costs
