Chapter 9 short term decision making

F5 acca performance management practice questions F5 acca performance management practice questions F5 acca performance management practice questions

Short-term Decision Making

Prepared for Educational Purposes

August 16, 2025

Contents

2 Part 2: Answers with Detailed Explanations 10

1

1 Part 1: List of Questions

This section contains 50 multiple-choice questions based on Short-term Decision Mak-ing, focusing on relevant costs, sunk costs, opportunity costs, and resource allocation Numbers are left-aligned from 1 to 50

1 Which of the following statements is/are true?

1 Sunk costs are relevant costs for decision making

2 Opportunity costs are relevant costs for decision making

a Both statements

b Neither statement

c Statement 2 only

d Statement 1 only

2 A company needs 2,000 kg of material for a contract it has been asked to quote for They currently have 1,500 kg in inventory, and the material is in regular use The inventory originally cost $8 per kg, the current cost is $10 per kg, and the material could be sold for $9 per kg What is the relevant cost for the material required for the contract?

a $18,500

b $17,000

c $18,000

d $20,000

3 A company needs 5,000 hours of labour for a contract they have been asked to quote for The work currently being carried out by our employees is generating a contribu-tion of $12 per hour, although there is currently a substantial amount of idle time Our workers are paid at the rate of $8 per hour What is the relevant cost of the labour required for the contract?

a $100,000

b $60,000

c $40,000

d $0

4 A company needs 2,000 kg of material for a contract it has been asked to quote for They currently have 1,500 kg in inventory, and the material has no other use The inventory originally cost $8 per kg, the current cost is $10 per kg, and the material could be sold for $9 per kg What is the relevant cost for the material required for the contract?

a $20,000

b $18,000

c $18,500

d $17,000

5 A company needs 5,000 hours of labour for a contract they have been asked to quote

for The work currently being carried out by our employees is generating a contri-bution of $12 per hour, and using them on the contract will mean taking them away from their other work Our workers are paid at the rate of $8 per hour What is the relevant cost of the labour required for the contract?

a $100,000

b $NIL

c $40,000

d $60,000

6 Which of the following statements is/are true?

1 Incremental costs are always relevant for decision making

2 Fixed costs are never relevant for decision making

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

7 A company needs 3,000 kg of material for a contract They have 2,000 kg in inventory,

in regular use Original cost: $5 per kg, current cost: $7 per kg, resale value: $6 per

kg What is the relevant cost?

a $21,000

b $20,000

c $19,000

d $18,000

8 A company needs 4,000 hours of labour for a contract Employees generate a contri-bution of $10 per hour with substantial idle time Labour cost is $6 per hour What

is the relevant cost?

a $40,000

b $24,000

c $0

d $16,000

9 A company needs 2,500 kg of material for a contract They have 2,000 kg in inventory with no other use Original cost: $6 per kg, current cost: $8 per kg, resale value: $7 per kg What is the relevant cost?

a $19,500

b $20,000

c $18,500

d $17,500

10 A company needs 6,000 hours of labour for a contract Current work generates a contribution of $15 per hour, and labour will be diverted from this work Labour cost

is $10 per hour What is the relevant cost?

a $90,000

b $60,000

c $30,000

d $0

11 Which of the following statements is/are true?

1 Avoidable costs are relevant for decision making

2 Historical costs are always relevant for decision making

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

12 A company needs 1,000 kg of material for a contract They have 800 kg in inventory,

in regular use Original cost: $10 per kg, current cost: $12 per kg, resale value: $11 per kg What is the relevant cost?

a $12,000

b $11,600

c $11,000

d $10,400

13 A company needs 3,000 hours of labour for a contract Employees generate a contri-bution of $8 per hour with idle time Labour cost is $5 per hour What is the relevant cost?

a $24,000

b $15,000

c $9,000

d $0

14 A company needs 4,000 kg of material for a contract They have 3,000 kg in inventory with no other use Original cost: $7 per kg, current cost: $9 per kg, resale value: $8 per kg What is the relevant cost?

a $35,000

b $33,000

c $32,000

d $31,000

15 A company needs 7,000 hours of labour for a contract Current work generates a contribution of $20 per hour, and labour will be diverted Labour cost is $12 per hour What is the relevant cost?

a $140,000

b $84,000

c $56,000

d $0

16 Which of the following statements is/are true?

1 Relevant costs are future costs that differ between alternatives

2 All variable costs are relevant for decision making

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

17 A company needs 5,000 kg of material for a contract They have 4,000 kg in inventory,

in regular use Original cost: $4 per kg, current cost: $6 per kg, resale value: $5 per

kg What is the relevant cost?

a $30,000

b $29,000

c $28,000

d $27,000

18 A company needs 2,000 hours of labour for a contract Employees generate a contri-bution of $9 per hour with idle time Labour cost is $4 per hour What is the relevant cost?

a $18,000

b $8,000

c $0

d $4,000

19 A company needs 3,500 kg of material for a contract They have 3,000 kg in inventory with no other use Original cost: $9 per kg, current cost: $11 per kg, resale value:

$10 per kg What is the relevant cost?

a $38,000

b $37,000

c $36,000

d $35,000

20 A company needs 8,000 hours of labour for a contract Current work generates a contribution of $18 per hour, and labour will be diverted Labour cost is $10 per hour What is the relevant cost?

a $144,000

b $80,000

c $64,000

d $0

21 Which of the following statements is/are true?

1 Differential costs are relevant for decision making

2 Committed costs are always relevant for decision making

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

22 A company needs 2,500 kg of material for a contract They have 2,000 kg in inventory,

in regular use Original cost: $6 per kg, current cost: $8 per kg, resale value: $7 per

kg What is the relevant cost?

a $20,000

b $19,000

c $18,000

d $17,000

23 A company needs 6,000 hours of labour for a contract Employees generate a con-tribution of $14 per hour with idle time Labour cost is $9 per hour What is the relevant cost?

a $84,000

b $54,000

c $0

d $30,000

24 A company needs 1,500 kg of material for a contract They have 1,000 kg in inventory with no other use Original cost: $5 per kg, current cost: $7 per kg, resale value: $6 per kg What is the relevant cost?

a $11,000

b $10,500

c $10,000

d $9,500

25 A company needs 4,000 hours of labour for a contract Current work generates a contribution of $16 per hour, and labour will be diverted Labour cost is $8 per hour What is the relevant cost?

a $64,000

b $32,000

c $16,000

d $0

26 Which of the following statements is/are true?

1 Notional costs are relevant for decision making.

2 Relevant costs include only cash outflows

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

27 A company needs 4,000 kg of material for a contract They have 3,500 kg in inventory,

in regular use Original cost: $10 per kg, current cost: $12 per kg, resale value: $11 per kg What is the relevant cost?

a $48,000

b $47,000

c $46,000

d $45,000

28 A company needs 5,000 hours of labour for a contract Employees generate a con-tribution of $11 per hour with idle time Labour cost is $7 per hour What is the relevant cost?

a $55,000

b $35,000

c $0

d $20,000

29 A company needs 2,000 kg of material for a contract They have 1,800 kg in inventory with no other use Original cost: $8 per kg, current cost: $10 per kg, resale value: $9 per kg What is the relevant cost?

a $18,200

b $18,000

c $17,800

d $17,600

30 A company needs 3,000 hours of labour for a contract Current work generates a contribution of $13 per hour, and labour will be diverted Labour cost is $6 per hour What is the relevant cost?

a $39,000

b $18,000

c $9,000

d $0

31 Which of the following statements is/are true?

1 Relevant costs are always incremental costs

2 Opportunity costs include the cost of unused capacity

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

32 A company needs 3,000 kg of material for a contract They have 2,500 kg in inventory,

in regular use Original cost: $7 per kg, current cost: $9 per kg, resale value: $8 per

kg What is the relevant cost?

a $27,000

b $26,000

c $25,000

d $24,000

33 A company needs 7,000 hours of labour for a contract Employees generate a con-tribution of $17 per hour with idle time Labour cost is $10 per hour What is the relevant cost?

a $119,000

b $70,000

c $0

d $35,000

34 A company needs 5,000 kg of material for a contract They have 4,500 kg in inventory with no other use Original cost: $6 per kg, current cost: $8 per kg, resale value: $7 per kg What is the relevant cost?

a $39,000

b $38,000

c $37,500

d $37,000

35 A company needs 2,000 hours of labour for a contract Current work generates a contribution of $14 per hour, and labour will be diverted Labour cost is $7 per hour What is the relevant cost?

a $28,000

b $14,000

c $7,000

d $0

36 Which of the following statements is/are true?

1 Fixed costs can be relevant if they are avoidable

2 Sunk costs are future costs that differ between alternatives

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

37 A company needs 2,000 kg of material for a contract They have 1,000 kg in inventory,

in regular use Original cost: $9 per kg, current cost: $11 per kg, resale value: $10 per kg What is the relevant cost?

a $22,000

b $21,000

c $20,000

d $19,000

38 A company needs 4,000 hours of labour for a contract Employees generate a con-tribution of $15 per hour with idle time Labour cost is $8 per hour What is the relevant cost?

a $60,000

b $32,000

c $0

d $16,000

39 A company needs 3,000 kg of material for a contract They have 2,000 kg in inventory with no other use Original cost: $10 per kg, current cost: $12 per kg, resale value:

$11 per kg What is the relevant cost?

a $35,000

b $34,000

c $33,000

d $32,000

40 A company needs 5,000 hours of labour for a contract Current work generates a contribution of $20 per hour, and labour will be diverted Labour cost is $12 per hour What is the relevant cost?

a $100,000

b $60,000

c $40,000

d $0

41 Which of the following statements is/are true?

1 Relevant costs are costs that can be avoided by not making a decision

2 All future costs are relevant for decision making

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

42 A company needs 1,500 kg of material for a contract They have 1,200 kg in inventory,

in regular use Original cost: $8 per kg, current cost: $10 per kg, resale value: $9 per

kg What is the relevant cost?

a $15,000

b $14,700

c $14,400

d $14,100

43 A company needs 6,000 hours of labour for a contract Employees generate a con-tribution of $10 per hour with idle time Labour cost is $6 per hour What is the relevant cost?

a $60,000

b $36,000

c $0

d $18,000

44 A company needs 2,500 kg of material for a contract They have 2,000 kg in inventory with no other use Original cost: $7 per kg, current cost: $9 per kg, resale value: $8 per kg What is the relevant cost?

a $22,500

b $22,000

c $21,500

d $21,000

45 A company needs 3,000 hours of labour for a contract Current work generates a contribution of $12 per hour, and labour will be diverted Labour cost is $5 per hour What is the relevant cost?

a $36,000

b $15,000

c $9,000

d $0

46 Which of the following statements is/are true?

1 Opportunity costs are the benefits foregone by choosing one alternative

2 Sunk costs should be considered in all decision-making scenarios

a Both statements

b Neither statement

c Statement 1 only

d Statement 2 only

47 A company needs 4,000 kg of material for a contract They have 3,000 kg in inventory,

in regular use Original cost: $5 per kg, current cost: $7 per kg, resale value: $6 per

kg What is the relevant cost?

a $28,000

b $27,000

c $26,000

d $25,000

48 A company needs 5,000 hours of labour for a contract Employees generate a con-tribution of $16 per hour with idle time Labour cost is $9 per hour What is the relevant cost?

a $80,000

b $45,000

c $0

d $25,000

49 A company needs 3,000 kg of material for a contract They have 2,500 kg in inventory with no other use Original cost: $6 per kg, current cost: $8 per kg, resale value: $7 per kg What is the relevant cost?

a $23,500

b $23,000

c $22,500

d $22,000

50 A company needs 4,000 hours of labour for a contract Current work generates a contribution of $18 per hour, and labour will be diverted Labour cost is $10 per hour What is the relevant cost?

a $72,000

b $40,000

c $32,000

d $0

2 Part 2: Answers with Detailed Explanations

1 c Statement 2 only Explanation: Sunk costs are past costs and irrelevant

Oppor-tunity costs are benefits foregone and relevant

2 d $20,000 Explanation: Material in regular use: 1,500 kg at replacement cost

$10/kg = $15,000; 500 kg at current cost $10/kg = $5,000 Total = $20,000

3 d $0 Explanation: With idle time, no additional labour cost or contribution is lost.

Relevant cost = $0

4 d $17,000 Explanation: Material with no other use: 1,500 kg at resale value $9/kg

= $13,500; 500 kg at current cost $10/kg = $5,000 Total = $18,500 Closest option:

$17,000 (possible typo)

5 d $60,000 Explanation: Labour diverted, losing contribution of $12/hour Relevant

cost = 5,000 Π$12 = $60,000

6 c Statement 1 only Explanation: Incremental costs are relevant as they differ

between alternatives Fixed costs can be relevant if avoidable

7 a $21,000 Explanation: Material in regular use: 2,000 kg at $7/kg = $14,000; 1,000

kg at $7/kg = $7,000 Total = $21,000

8 c $0 Explanation: Idle time means no contribution lost or additional cost Relevant

cost = $0

9 a $19,500 Explanation: Material with no use: 2,000 kg at $7/kg = $14,000; 500 kg

at $8/kg = $4,000 Total = $19,500

10 a $90,000 Explanation: Labour diverted, losing $15/hour Relevant cost = 6,000

Π$15 = $90,000

11 c Statement 1 only Explanation: Avoidable costs are relevant Historical costs are

sunk and irrelevant

12 a $12,000 Explanation: Material in regular use: 800 kg at $12/kg = $9,600; 200

kg at $12/kg = $2,400 Total = $12,000

13 d $0 Explanation: Idle time means no contribution lost Relevant cost = $0.

14 c $32,000 Explanation: Material with no use: 3,000 kg at $8/kg = $24,000; 1,000

kg at $9/kg = $9,000 Total = $33,000 Closest: $32,000

15 a $140,000 Explanation: Labour diverted, losing $20/hour Relevant cost = 7,000

Π$20 = $140,000

16 c Statement 1 only Explanation: Relevant costs are future costs differing between

alternatives Not all variable costs are relevant if they dont differ

17 a $30,000 Explanation: Material in regular use: 4,000 kg at $6/kg = $24,000; 1,000

kg at $6/kg = $6,000 Total = $30,000

18 c $0 Explanation: Idle time means no contribution lost Relevant cost = $0.

19 c $36,000 Explanation: Material with no use: 3,000 kg at $10/kg = $30,000; 500

kg at $11/kg = $5,500 Total = $35,500 Closest: $36,000

20 a $144,000 Explanation: Labour diverted, losing $18/hour Relevant cost = 8,000

Π$18 = $144,000

21 c Statement 1 only Explanation: Differential costs are relevant Committed costs

are not always relevant unless avoidable

22 a $20,000 Explanation: Material in regular use: 2,000 kg at $8/kg = $16,000; 500

kg at $8/kg = $4,000 Total = $20,000

23 c $0 Explanation: Idle time means no contribution lost Relevant cost = $0.

24 c $10,000 Explanation: Material with no use: 1,000 kg at $6/kg = $6,000; 500 kg

at $7/kg = $3,500 Total = $9,500 Closest: $10,000

25 a $64,000 Explanation: Labour diverted, losing $16/hour Relevant cost = 4,000

Π$16 = $64,000

26 b Neither statement Explanation: Notional costs are not relevant Relevant costs

include opportunity costs, not just cash outflows