Question

As a study aid, 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.
8. 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 fixed costs will not.

Answer 1

Answer: Please refer to Explanation.

Explanation:

1. FALSE. The actual first step is to Identify if there is a problem or an Opportunity to be leveraged.

2. FALSE. The final step is to review the decision as time goes on to see it's effectiveness.

3. True.

4. FALSE. When making business decisions, management considers more than just financial statements because financial information does not have all the information about opportunities.

5. True.

6. True.

7. FALSE. Costs that are the same under all alternative courses of action do not affect the decision.

8. FALSE. Sometimes both costs ans revenue change. Sometimes only one of them changes.

9. FALSE. Sometimes fixed costs change as well and sometimes Variable Costs will not.