New Selling Skills

CHAPTER 6

RELEVANT INFORMATION AND DECISION MAKING: PRODUCTION DECISIONS

TRUE / FALSE:

1. Opportunity costs need to be considered when deciding on the use of limited resources.

T

2. Opportunity cost depends on alternatives available at a point in time.

T

3. Opportunity costs and outlay costs are widely used synonyms.

F

4. Opportunity costs apply to resources that will be owned.

F

6. Outsourcing is a make-or-buy decision for services.

T

7. Qualitative factors do not affect a make-or-buy decision.

F

8. In a make-or-buy decision, if facilities are and will remain idle when the decision is made to not make a part internally, then the opportunity cost is zero.

T

9. The key reasons that companies outsource are to improve the company’s focus and reduce operating costs.

T

18. Past costs can be good predictors of future costs.

T

19. The cost of inventory is relevant when deciding whether to dispose of the inventory in cases of obsolescence.

F

20. The disposal value of old equipment is relevant.

T

21. Sunk cost is another term for historical cost or past cost.

T

22. When making a decision to replace some old equipment with new, the depreciation taken on both the old or new equipment is irrelevant information.

T

24. Future costs are relevant if they are the same under all feasible alternatives.

F

25. Equipment’s book value is the original cost plus depreciation.

F

26. Past costs may affect future payments for income taxes.

T

34. The contribution margin is computed using variable manufacturing costs and variable selling and administrative costs.

T

MULTIPLE CHOICE:

35. Joe Smith has paid off the mortgage on his house and continues to live in the house. The interest income forgone by not selling the house and investing the proceeds is an example of a(n):...