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Operations Now Supply Chain Profitability and Performance 3rd Edition By Byron J.Finch -Test Bank

Operations Now Supply Chain Profitability and Performance 3rd Edition By Byron J.Finch -Test Bank   Instant Download - Complete Test Bank With Answers     Sample Questions Are Posted Below   c5 Student: ___________________________________________________________________________ Cost is the currency by which the benefits of all of the other value attributes are measured. True    False   Cost influences …

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Operations Now Supply Chain Profitability and Performance 3rd Edition By Byron J.Finch -Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

c5

Student: ___________________________________________________________________________

  1. Cost is the currency by which the benefits of all of the other value attributes are measured.
    True    False

 

  1. Cost influences profitability directly through the net income calculation via the cost of goods sold.
    True    False

 

  1. Business customers compare the cost of a product or service they are purchasing to its potential for adding value to their product or service.
    True    False

 

  1. Cost savings that are not passed on the customer go directly to profitability.
    True    False

 

  1. It is becoming more common practice to directly charge customers for costs that used to be considered just a cost of doing business, through the use of surcharges.
    True    False

 

  1. Average costs typically represent all of the costs associated with a product during a specific period of time.
    True    False

 

  1. Cleaning chemicals represent an example of a direct cost for a hotel.
    True    False

 

  1. Measuring and managing costs, as they relate to operations resources, is an important component of decision-making.
    True    False

 

  1. Operations decisions are frequently motivated by the desire to increase a variance.
    True    False

 

  1. Cost per unit is more accurately described as average cost per unit.
    True    False

 

  1. Which of the following statements is not true about costs?
    A. Cost is the currency by which the benefits of all of the other value attributes are measured
    B. The link between costs and operations comes directly through costs added in processes
    C. As costs go up, perceived value drops, and then demand drops, reducing net sales
    D. Costs generally play a minor role in customers’ perception of value.
    E. For the customer, cost is more than merely price

 

  1. Costs can be measured in terms of:
    A. Money
    B. Time
    C. Customer loyalty
    D. Flexibility
    E. All of the above

 

  1. Costs of resources used in nonproduction elements of a business are referred to as:
    A. Expected costs
    B. Out-of-pocket costs
    C. Period costs
    D. Product costs
    E. Actual costs

 

  1. Forecasted payments for future resources are known as
    A. Expected costs
    B. Out-of-pocket costs
    C. Period costs
    D. Product costs
    E. Actual costs

 

  1. Which of the following statements is NOT true with regard to average costs?
    A. Average costs represent all of the costs of all resources obtained in a particular period
    B. Average costs provide an excellent way to compare current costs with historical costs
    C. In many cases, the cost used to make an operation decision is an average cost
    D. Average costs can lull a business into ignoring important details
    E. None of the above is true

 

  1. Which of the following statements are not true about the value chain?
    A. All of the value of a product or service is added in the value chain
    B. The value chain is a critical concept when cost implications for operations management are examined
    C. The value chain illustrates which aspects of a business add value and which do not
    D. The value chain concept provides a stepping-stone to the concept of an activity
    E. All of the costs of a product or service are incurred along the value chain

 

  1. Basic units of work which make up processes are known as
    A. Value units
    B. Activities
    C. Cost objects
    D. Supply chain links

 

  1. Management accounting systems use _________ as a basis for assigning costs
    A. Variances
    B. Cost objects
    C. Resources
    D. Overhead
    E. All of the above

 

  1. A cost object can be a:
    A. Customer
    B. Department
    C. Service
    D. Product
    E. All of the above

 

  1. Which of the following statements are not true about cost objects?
    A. A cost object can be a product, customer, service, department, or activity
    B. Assigning costs to cost objects can only be done through direct tracing
    C. The accurate assignment of costs to cost objects is important to good operations decision making
    D. A cost object is an item for which costs are measured and assigned
    E. None of the above statements is true.

 

  1. The difference between desired and actual cost is known as:
    A. Direct tracing
    B. Indirect tracing
    C. A variance
    D. A standard
    E. None of the above

 

  1. Using more sugar than desired in a recipe, with the actual price equal to standard price, would likely result in
    A. A usage variance
    B. A price Variance
    C. A change in the usage standard
    D. A change in the price standard
    E. None of the above

 

  1. Assigning of the cost of computer programming to a cost object such as the loan-processing department is an example of the use of:
    A. Direct tracing
    B. Resource drivers
    C. Activity drivers
    D. Assignment drivers
    E. None of the Above

 

  1. Which of the following statements is true about production costs?
    A. Production costs are broken down into direct materials, direct labor, and overhead
    B. Production costs are those costs associated with selling and administration
    C. Cost management systems identify product costs for internal financial reporting
    D. Production costs are the same as average cost per unit
    E. None of the above are true

 

  1. Which of the following statements is not true about variance analysis?
    A. Variance analysis is used to help isolate costs that are not what they should be
    B. Almost any type of resource can be analyzed using variance analysis
    C. Variance analysis drives many operations actions because it facilitates the control of various contributors of cost
    D. Unfavorable variances often provide the catalyst for productivity improvements
    E. The actual quantity at the standard price minus the standard quantity at the standard price provides the total variance

 

  1. A generic and frequently used measure of the productivity of resources is the:
    A. Cost of goods sold
    B. Cost per unit
    C. Total cost
    D. Variance
    E. None of the above

 

  1. Which of the following statements is true?
    A. A reduction the cost per unit will result in improved profitability measures
    B. A reduction in cost per unit can often be achieved by reducing the number of units produced.
    C. A reduction in cost per unit must also reduce total costs
    D. Using cost per unit as a measure is an effective way to prevent managers from misrepresenting performance figures
    E. None of the above is true

 

  1. Breakeven analysis is used
    A. When variance analysis can’t be performed
    B. As an alternative to direct tracing
    C. To decide among alternatives with different fixed and variable costs
    D. To decide among alternatives with financial and nonfinancial costs
    E. To decide between short-term and long-term cost reduction

 

  1. In breakeven analysis, the reduction of the fixed cost of an alternative, while leaving all other costs of alternatives the same
    A. Will make it relatively more attractive at lower volumes of production
    B. Will make it relatively less attractive at lower volumes of production
    C. Will not change its attractiveness at lower volumes but will make it more expense on a per unit bases
    D. Will result in the variable cost increasing because the combination of variable and fixed costs must stay the same.

 

  1. In breakeven analysis, the point of intersection between the cost curves of two alternatives represents
    A. The volume at which all costs are minimized
    B. The volume at which the cost of the low-cost alternative is minimized
    C. The volume at which the cost of the high-cost alternative is minimized
    D. The optimal production volume
    E. The volume at which the costs of the two alternatives are the same

 

  1. The following information pertains to the costs and usage of leather for the upholstery of a desk chair:
    Standard Quantity: 12 sq. ft.
    Standard Price: $1.60 per sq. ft.
    Actual Quantity: 9 sq. ft
    Actual Price: $1.60 per sq. ft
    Which of the follow statements are true about the variance?
    A. The price variance is 3
    B. The usage variance is 0
    C. The total variance is -$4.80
    D. The Price variance is $4.80
    E. None of the above is true

 

  1. The following information pertains to the costs and usage of Tabasco sauce in a restaurant’s barbeque sauce recipe:
    Standard Quantity: 10 bottles
    Standard Price: $1.45 per bottle ft.
    Actual Quantity: 10 bottles
    Actual Price: $1.50 per bottle
    Which of the follow statements are NOT true about the variance?
    A. The price variance is $.50
    B. The usage variance is $.0
    C. The total variance is $.50
    D. The total cost of a batch is $14.50
    E. All of the above are true

 

  1. The following information pertains to the costs and usage of the active ingredient in a pharmaceutical company’s painkiller formulation:
    Standard Quantity: 205 grams
    Standard Price: $3.50 per gram
    Actual Quantity: 220 grams
    Actual Price: $3.70 per gram
    Which of the follow statements are NOT true about the variance?
    A. The price variance is $44.00
    B. The usage variance is $52.50
    C. The total variance is $96.50
    D. The total cost of a batch is $814.00
    E. All of the above are true

 

  1. A local print shop is trying to select the low-cost color printer among two alternatives. Alternative A costs $49,000 and $.14 per page. Alternative B costs $61,000 and $.09 per page. At what volume will the total costs for the two alternatives be the same?
    A. 12,000
    B. 240,000
    C. 677,778
    D. 350,000
    E. 110,000

 

  1. Richard is attempting to select a photo printer so he can produce high-quality prints of his digital photographs. Printer A costs $190 and toner consumption is estimated to cost $.30 per print. Printer B costs $285 and toner consumption is estimated at $.20 per print. Richard expects to use the printer for one year, at which time he’ll probably upgrade to a better one. Which of the following statements is true about the comparison of the two printers?
    A. If Richard averages less than 79 prints per month over the next year, Printer A will be cheaper for him.
    B. On average, Richard’s photos will cost $.50 each no matter which printer he selects.
    C. If Richard selects the low-cost printer at a volume of 1000 prints, and actually prints 1200 pictures over the next year, his total cost will be $485.
    D. If Richard expects to print 1200 pictures over the next year, printer A will be cheaper to own.

 

  1. As costs go up, value _____.
    ________________________________________

 

  1. In many cases, wrong decisions are made because _____ costs are overlooked.
    ________________________________________

 

  1. Lack of reliability of a new car translates directly into a _____ cost of ownership.
    ________________________________________

 

  1. _______ costs are cash payments made for resources.
    ________________________________________

 

  1. A _____ ______ can be a customer, product, service, department, or activity.
    ________________________________________

 

  1. Two types of drivers that can be used to assign costs to cost objects are ______ and ______.
    ________________________________________

 

  1. ______ and _____ are two costs that often lose in a monetary cost reduction tradeoff because it is extremely difficult to place value on them.
    ________________________________________

 

  1. Match these items.
    A. Measure demands placed on resources by activities
    B. Selling and administration
    C. Cost of resources used in nonproduction elements of the business
    D. Overhead, direct material, and direct labor
    E. Generic measure of the productivity of resources purchased
    F. Measure the demands that cost objects place on activities
    G. Cash payment made for resources
    H. Entities that management would want to know the cost of
    I. Assigning cost to cost objects
    J. Used to help isolate costs that are not what they should be
    ___ 1. Out-of-pocket costs
    ___ 2. Resource drivers
    ___ 3. Production cost
    ___ 4. Cost traceability
    ___ 5. Variance analysis
    ___ 6. Period costs
    ___ 7. Activity drivers
    ___ 8. Cost objects
    ___ 9. Nonproduction costs
    ___ 10. Cost per unit

 

 

 

 

  1. Why is it important for Internet retailers to provide all cost information early to customers?

 

 

 

 

  1. By means of a diagram, briefly discuss a value chain you are familiar with. Why is the value chain a critical concept when cost implications for operations management are examined?

 

 

 

 

  1. Explain how the use of average costs can result in poor decisions.

 

 

 

 

  1. Why are nonfinancial costs often ignored in decision-making?

 

 

 

 

 

 

c5 Key

  1. Cost is the currency by which the benefits of all of the other value attributes are measured.
    TRUE

 

Finch – Chapter 05 #1
Level: Easy
 

  1. Cost influences profitability directly through the net income calculation via the cost of goods sold.
    TRUE

 

AACSB: Analytic
Finch – Chapter 05 #2
Level: Medium
 

  1. Business customers compare the cost of a product or service they are purchasing to its potential for adding value to their product or service.
    TRUE

 

Finch – Chapter 05 #3
Level: Medium
 

  1. Cost savings that are not passed on the customer go directly to profitability.
    TRUE

 

Finch – Chapter 05 #4
Level: Easy
 

  1. It is becoming more common practice to directly charge customers for costs that used to be considered just a cost of doing business, through the use of surcharges.
    TRUE

 

Finch – Chapter 05 #5
Level: Medium
 

  1. Average costs typically represent all of the costs associated with a product during a specific period of time.
    FALSE

 

Finch – Chapter 05 #6
Level: Easy
 

  1. Cleaning chemicals represent an example of a direct cost for a hotel.
    FALSE

 

Finch – Chapter 05 #7
Level: Medium
 

  1. Measuring and managing costs, as they relate to operations resources, is an important component of decision-making.
    TRUE

 

Finch – Chapter 05 #8
Level: Medium
 

  1. Operations decisions are frequently motivated by the desire to increase a variance.
    FALSE

 

Finch – Chapter 05 #9
Level: Medium
 

  1. Cost per unit is more accurately described as average cost per unit.
    TRUE

 

Finch – Chapter 05 #10
Level: Medium
 

  1. Which of the following statements is not true about costs?
    A.Cost is the currency by which the benefits of all of the other value attributes are measured
    B. The link between costs and operations comes directly through costs added in processes
    C. As costs go up, perceived value drops, and then demand drops, reducing net sales
    D. Costs generally play a minor role in customers’ perception of value.
    E. For the customer, cost is more than merely price

 

AACSB: Analytic
Finch – Chapter 05 #11
Level: Difficult
 

  1. Costs can be measured in terms of:
    A.Money
    B. Time
    C. Customer loyalty
    D. Flexibility
    E. All of the above

 

Finch – Chapter 05 #12
Level: Easy
 

  1. Costs of resources used in nonproduction elements of a business are referred to as:
    A.Expected costs
    B. Out-of-pocket costs
    C. Period costs
    D. Product costs
    E. Actual costs

 

AACSB: Analytic
Finch – Chapter 05 #13
Level: Easy
 

  1. Forecasted payments for future resources are known as
    A.Expected costs
    B. Out-of-pocket costs
    C. Period costs
    D. Product costs
    E. Actual costs

 

Finch – Chapter 05 #14
Level: Easy
 

  1. Which of the following statements is NOT true with regard to average costs?
    A.Average costs represent all of the costs of all resources obtained in a particular period
    B. Average costs provide an excellent way to compare current costs with historical costs
    C. In many cases, the cost used to make an operation decision is an average cost
    D. Average costs can lull a business into ignoring important details
    E. None of the above is true

 

Finch – Chapter 05 #15
Level: Difficult
 

  1. Which of the following statements are not true about the value chain?
    A.All of the value of a product or service is added in the value chain
    B. The value chain is a critical concept when cost implications for operations management are examined
    C. The value chain illustrates which aspects of a business add value and which do not
    D. The value chain concept provides a stepping-stone to the concept of an activity
    E. All of the costs of a product or service are incurred along the value chain

 

AACSB: Reflective Thinking
Finch – Chapter 05 #16
Level: Difficult
 

  1. Basic units of work which make up processes are known as
    A.Value units
    B. Activities
    C. Cost objects
    D. Supply chain links

 

Finch – Chapter 05 #17
Level: Easy
 

  1. Management accounting systems use _________ as a basis for assigning costs
    A.Variances
    B. Cost objects
    C. Resources
    D. Overhead
    E. All of the above

 

Finch – Chapter 05 #18
Level: Easy
 

  1. A cost object can be a:
    A.Customer
    B. Department
    C. Service
    D. Product
    E. All of the above

 

Finch – Chapter 05 #19
Level: Medium
 

  1. Which of the following statements are not true about cost objects?
    A.A cost object can be a product, customer, service, department, or activity
    B. Assigning costs to cost objects can only be done through direct tracing
    C. The accurate assignment of costs to cost objects is important to good operations decision making
    D. A cost object is an item for which costs are measured and assigned
    E. None of the above statements is true.

 

Finch – Chapter 05 #20
Level: Difficult
 

  1. The difference between desired and actual cost is known as:
    A.Direct tracing
    B. Indirect tracing
    C. A variance
    D. A standard
    E. None of the above

 

Finch – Chapter 05 #21
Level: Medium
 

  1. Using more sugar than desired in a recipe, with the actual price equal to standard price, would likely result in
    A.A usage variance
    B. A price Variance
    C. A change in the usage standard
    D. A change in the price standard
    E. None of the above

 

Finch – Chapter 05 #22
Level: Medium
 

  1. Assigning of the cost of computer programming to a cost object such as the loan-processing department is an example of the use of:
    A.Direct tracing
    B. Resource drivers
    C. Activity drivers
    D. Assignment drivers
    E. None of the Above

 

Finch – Chapter 05 #23
Level: Medium
 

  1. Which of the following statements is true about production costs?
    A.Production costs are broken down into direct materials, direct labor, and overhead
    B. Production costs are those costs associated with selling and administration
    C. Cost management systems identify product costs for internal financial reporting
    D. Production costs are the same as average cost per unit
    E. None of the above are true

 

Finch – Chapter 05 #24
Level: Difficult
 

  1. Which of the following statements is not true about variance analysis?
    A.Variance analysis is used to help isolate costs that are not what they should be
    B. Almost any type of resource can be analyzed using variance analysis
    C. Variance analysis drives many operations actions because it facilitates the control of various contributors of cost
    D. Unfavorable variances often provide the catalyst for productivity improvements
    E. The actual quantity at the standard price minus the standard quantity at the standard price provides the total variance

 

AACSB: Analytic
Finch – Chapter 05 #25
Level: Difficult
 

  1. A generic and frequently used measure of the productivity of resources is the:
    A.Cost of goods sold
    B. Cost per unit
    C. Total cost
    D. Variance
    E. None of the above

 

Finch – Chapter 05 #26
Level: Medium
 

  1. Which of the following statements is true?
    A.A reduction the cost per unit will result in improved profitability measures
    B. A reduction in cost per unit can often be achieved by reducing the number of units produced.
    C. A reduction in cost per unit must also reduce total costs
    D. Using cost per unit as a measure is an effective way to prevent managers from misrepresenting performance figures
    E. None of the above is true

 

AACSB: Analytic
Finch – Chapter 05 #27
Level: Medium
 

  1. Breakeven analysis is used
    A.When variance analysis can’t be performed
    B. As an alternative to direct tracing
    C. To decide among alternatives with different fixed and variable costs
    D. To decide among alternatives with financial and nonfinancial costs
    E. To decide between short-term and long-term cost reduction

 

Finch – Chapter 05 #28
Level: Easy
 

  1. In breakeven analysis, the reduction of the fixed cost of an alternative, while leaving all other costs of alternatives the same
    A.Will make it relatively more attractive at lower volumes of production
    B. Will make it relatively less attractive at lower volumes of production
    C. Will not change its attractiveness at lower volumes but will make it more expense on a per unit bases
    D. Will result in the variable cost increasing because the combination of variable and fixed costs must stay the same.

 

AACSB: Analytic
Finch – Chapter 05 #29
Level: Difficult
 

  1. In breakeven analysis, the point of intersection between the cost curves of two alternatives represents
    A.The volume at which all costs are minimized
    B. The volume at which the cost of the low-cost alternative is minimized
    C. The volume at which the cost of the high-cost alternative is minimized
    D. The optimal production volume
    E. The volume at which the costs of the two alternatives are the same

 

Finch – Chapter 05 #30
Level: Medium
 

  1. The following information pertains to the costs and usage of leather for the upholstery of a desk chair:
    Standard Quantity: 12 sq. ft.
    Standard Price: $1.60 per sq. ft.
    Actual Quantity: 9 sq. ft
    Actual Price: $1.60 per sq. ft
    Which of the follow statements are true about the variance?
    A.The price variance is 3
    B. The usage variance is 0
    C. The total variance is -$4.80
    D. The Price variance is $4.80
    E. None of the above is true

 

AACSB: Analytic
Finch – Chapter 05 #31
Level: Medium
 

  1. The following information pertains to the costs and usage of Tabasco sauce in a restaurant’s barbeque sauce recipe:
    Standard Quantity: 10 bottles
    Standard Price: $1.45 per bottle ft.
    Actual Quantity: 10 bottles
    Actual Price: $1.50 per bottle
    Which of the follow statements are NOT true about the variance?
    A.The price variance is $.50
    B. The usage variance is $.0
    C. The total variance is $.50
    D. The total cost of a batch is $14.50
    E. All of the above are true

 

AACSB: Analytic
Finch – Chapter 05 #32
Level: Medium
 

  1. The following information pertains to the costs and usage of the active ingredient in a pharmaceutical company’s painkiller formulation:
    Standard Quantity: 205 grams
    Standard Price: $3.50 per gram
    Actual Quantity: 220 grams
    Actual Price: $3.70 per gram
    Which of the follow statements are NOT true about the variance?
    A.The price variance is $44.00
    B. The usage variance is $52.50
    C. The total variance is $96.50
    D. The total cost of a batch is $814.00
    E. All of the above are true

 

AACSB: Analytic
Finch – Chapter 05 #33
Level: Medium
 

  1. A local print shop is trying to select the low-cost color printer among two alternatives. Alternative A costs $49,000 and $.14 per page. Alternative B costs $61,000 and $.09 per page. At what volume will the total costs for the two alternatives be the same?
    A.12,000
    B. 240,000
    C. 677,778
    D. 350,000
    E. 110,000

 

AACSB: Analytic
Finch – Chapter 05 #34
Level: Medium
 

  1. Richard is attempting to select a photo printer so he can produce high-quality prints of his digital photographs. Printer A costs $190 and toner consumption is estimated to cost $.30 per print. Printer B costs $285 and toner consumption is estimated at $.20 per print. Richard expects to use the printer for one year, at which time he’ll probably upgrade to a better one. Which of the following statements is true about the comparison of the two printers?
    A.If Richard averages less than 79 prints per month over the next year, Printer A will be cheaper for him.
    B. On average, Richard’s photos will cost $.50 each no matter which printer he selects.
    C. If Richard selects the low-cost printer at a volume of 1000 prints, and actually prints 1200 pictures over the next year, his total cost will be $485.
    D. If Richard expects to print 1200 pictures over the next year, printer A will be cheaper to own.

 

AACSB: Analytic
Finch – Chapter 05 #35
Level: Difficult
 

  1. As costs go up, value _____.
    declines

 

Finch – Chapter 05 #36
Level: Easy
 

  1. In many cases, wrong decisions are made because _____ costs are overlooked.
    non-financial

 

Finch – Chapter 05 #37
Level: Medium
 

  1. Lack of reliability of a new car translates directly into a _____ cost of ownership.
    higher

 

Finch – Chapter 05 #38
Level: Medium
 

  1. _______ costs are cash payments made for resources.
    out-of-pocket

 

Finch – Chapter 05 #39
Level: Easy
 

  1. A _____ ______ can be a customer, product, service, department, or activity.
    cost object

 

Finch – Chapter 05 #40
Level: Easy
 

  1. Two types of drivers that can be used to assign costs to cost objects are ______ and ______.
    resource, activity

 

Finch – Chapter 05 #41
Level: Easy
 

  1. ______ and _____ are two costs that often lose in a monetary cost reduction tradeoff because it is extremely difficult to place value on them.
    time, flexibility

 

Finch – Chapter 05 #42
Level: Medium
 

  1. Match these items.
    A. Measure demands placed on resources by activities
    B. Selling and administration
    C. Cost of resources used in nonproduction elements of the business
    D. Overhead, direct material, and direct labor
    E. Generic measure of the productivity of resources purchased
    F. Measure the demands that cost objects place on activities
    G. Cash payment made for resources
    H. Entities that management would want to know the cost of
    I. Assigning cost to cost objects
    J. Used to help isolate costs that are not what they should be
    ___ 1. Out-of-pocket costs
    ___ 2. Resource drivers
    ___ 3. Production cost
    ___ 4. Cost traceability
    ___ 5. Variance analysis
    ___ 6. Period costs
    ___ 7. Activity drivers
    ___ 8. Cost objects
    ___ 9. Nonproduction costs
    ___ 10. Cost per unit

1-G; 2-A; 3-D; 4-I; 5-J; 6-C; 7-F; 8-H; 9-B; 10-E

 

Finch – Chapter 05 #43
Level: Difficult
 

  1. Why is it important for Internet retailers to provide all cost information early to customers?

If a retailer withholds important cost information, such as shipping and handling charges, until very late in the checkout process, there is a great likelihood that the customer will abandon their “shopping carts” at the online checkout. Also, the customer might think that the retailer is trying to misguide or cheat him/her.

 

AACSB: Reflective Thinking
Finch – Chapter 05 #44
 

  1. By means of a diagram, briefly discuss a value chain you are familiar with. Why is the value chain a critical concept when cost implications for operations management are examined?

A value chain is a model of an organization that links all its processes together, from the initial task of obtaining resources to the final task of delivering a product or service to the customer. Exhibit 5.2 provides a generic value chain. The value chain is a critical concept when cost implications for operations management are examined because: (1) the value chain illustrates which aspects of a business add value and which do not, (2) value chain permits a more in-depth analysis of processes to ensure activities in the chain that add value are being conducted, and (3) the value chain concept provides a stepping stone to the concept of an activity.

 

AACSB: Reflective Thinking
Finch – Chapter 05 #45
 

  1. Explain how the use of average costs can result in poor decisions.

Using average cost, particularly when examining costs associate with a product or service during a specific period of time. Because demands often fluctuate, average costs are not very representative of actual costs incurred. Also, by focusing on averages, management can overlook specifics which may be very important.

 

AACSB: Reflective Thinking
Finch – Chapter 05 #46
 

  1. Why are nonfinancial costs often ignored in decision-making?

Nonfinancial costs are often ignored because they can’t be quantified. Since performance is based, for the most part, on financial measures, taking into account a cost that does not show up on performance measures doesn’t improve the measure. Businesses held to certain levels of financial performance will be attracted to decision alternatives that improve those measures.

 

AACSB: Reflective Thinking
Finch – Chapter 05 #47
 

 

 

c5 Summary

Category # of Questions
AACSB: Analytic 11
AACSB: Reflective Thinking 5
Finch – Chapter 05 47
Level: Difficult 9
Level: Easy 13
Level: Medium 21

 

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