Derauf has prepared the following list of statements about decision making and i

Question

Derauf has prepared the following list of statements about decision making and incremental analysis. Identify each statement as true or false. If false, indicate how to correct the statement.

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 course of action, but revenues will not.
9. Variable costs will change under alternative courses of action, but fixed costs will not.

Explanation / Answer

1. Identify the problem and assign responsibility 2. Review results of the decision 4. management ordinarily considers both financial and nonfinancial information 8. both costs and revenues will vary, in other case only costs or revenues will vary

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