Question

Exercise 7-1 as a study ald, your classmate Pascal Adams has prepared the following list of statements about decision-making and incremental analysis. Identify each statement as true or false 1. The first step in management's decision-making process is, Determine and evaluate possible courses of action." 2. The final step in management's decision-making process is to actually make the decision. 3. Accounting's contribution to management's decision-making process occurs primarily in evaluating possible courses of action and in reviewing the results 4. In making business decisions, management ordinarily considers only financial information because it is objectively determined. 5. Decisions involve a choice among alternative courses of action. 6. The process used to identify the financial data that change under alternative courses of action is called incremental analysis 7. Costs that are the same under all alternative courses of action sometimes affect the decision 6. When using incremental analysis, some costs will always change under alternative courses of action, but revenues will not 9. Variable costs will change under alternative courses of action, but foxed costs will not Click if you would like to show Work for this questions Open Show Work By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor Question Attempts of 3 used CAVE FOR LATER SUBMIT ANSWER Earn Maximum Points available only if you answer this question correctly in two attempts or less

Answer 1

Solution:

Exercise 7-1

(1) False, The first step in Management’s Decision Making Process is Identifying a Problem or Opportunity.

(2) False, The last step in Management’s Decision Making is Reviewing (Evaluating) results of the decision

(3) True, Accounting’s Contribution to management’s decision making process occurs primarily in evaluating possible courses of action and in reviewing the results.

(4) False, In Making Business decisions, management ordinarily considers both Financial and Non Financial Information.

(5) True, Decisions involve a choice among alternative course of action.

(6) True, The Process used to Identify the financial data that change under alternative courses of action is called Incremental Analysis.

(7) False, Costs that are same under all alternative Courses of action do not affect the decision.

(8) False, In Incremental Analysis Both cost and Revenue can vary , in some cases Only Cost or Only Revenue can vary.

(9) False; It is not necessary that Variable costs will change under alternative courses of action, but fixed costs will not.

Sometimes Variable costs do not change under the alternative course of action, And Sometimes Fixed Costs Change

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Exercise 7-7

Incremental analysis

	Retain Equipment	Replace Equipment	Net income Increase/(Decrease)
Variable manufacturing cost	4,292,400 (613,200*7)	4,116,700 (588,100*7)	175,700
New machine cost	-	484,500	-484,500
Sell old machine	-	-31,600	31,600
Total	$4,292,400	$4,569,600	-$277,200

                          

The old factory machine should be retained.