cost ccountingc hapter 21.doc

Cost Accounting, 14e (Horngren/Datar/Rajan) Chapter 21 Capital Budgeting and Cost Analysis Objective 21.1 1) Which of the following involves significant financial investments in projects to develop new products, expand production capacity, or remodel current production facilities? A) capital budgeting B) working capital C) master budgeting D) project-cost budgeting Answer: A Diff: 1 Terms: capital budgeting Objective: 1 AACSB: Reflective thinking 2) The accounting system that corresponds to the project dimension in capital budgeting is the: A) net present value method B) internal rate of return C) accrual accounting rate of return D) life-cycle costing Answer: D Diff: 1 Terms: capital budgeting Objective: 1 AACSB: Reflective thinking 3) Capital budgeting is the process of making long-run planning decisions for investments in projects. Answer: TRUE Diff: 2 Terms: capital budgeting Objective: 1 AACSB: Analytical skills 4) A capital budget spans only a one-year period. Answer: FALSE Explanation: A capital budget normally is for a period of time greater than one year. Diff: 2 Terms: capital budgeting Objective: 1 AACSB: Analytical skills 5) The identify projects stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects. Answer: FALSE Explanation: This is the definition of the obtain information stage. Diff: 1 Terms: capital budgeting Objective: 1 AACSB: Analytical skills 6) The obtain information stage of capital budgeting gathers information from all parts of the value chain to evaluate alternative projects. Answer: TRUE Diff: 1 Terms: capital budgeting Objective: 1 AACSB: Analytical skills 7) The make decisions by choosing among alternatives stage of the capital budgeting process consists of determining which investment yields the greatest benefit and the least cost to the organization. Answer: TRUE Diff: 1 Terms: capital budgeting Objective: 1 AACSB: Analytical skil