Decision-making in Cost Analysis and Business Strategy Quiz
Challenge yourself with questions on cost drivers, break-even point, NPV, relevant costs, and more in this cost analysis quiz.
#1
Which of the following is NOT a primary cost driver in manufacturing?
Labor
Raw materials
Advertising expenses
Energy consumption
#2
What is the opportunity cost?
The cost of alternative options foregone when a decision is made
The total cost of production
The cost of raw materials
The cost of labor
#3
What is the purpose of a cost-benefit analysis?
To determine the profitability of a business venture
To evaluate the potential benefits of a decision against its costs
To assess the performance of a company
To calculate the total costs of a project
#4
What is the break-even point?
The point at which total revenue equals total variable costs
The point at which total revenue equals total fixed costs
The point at which total revenue equals total costs
The point at which total revenue equals total profit
#5
What is the Net Present Value (NPV) of an investment project?
The sum of initial investment and future cash flows discounted at the project's cost of capital
The difference between the present value of cash inflows and the present value of cash outflows
The present value of future cash flows divided by the initial investment
The total cash flows generated by an investment project
#6
Which cost analysis technique involves assessing the cost of a product at each stage of its production?
Activity-Based Costing (ABC)
Marginal Costing
Throughput Accounting
Total Cost Analysis
#7
Which of the following is NOT a characteristic of relevant costs?
They are future-oriented
They are avoidable costs
They vary between alternatives
They are sunk costs
#8
What is the purpose of sensitivity analysis in decision-making?
To identify the factors that are most sensitive to changes in assumptions
To analyze the impact of uncertainty on decision outcomes
To determine the sensitivity of costs to changes in production volume
To evaluate the sensitivity of revenues to changes in prices
#9
What does the term 'cost behavior' refer to in cost analysis?
The way costs change in response to changes in activity levels
The way costs remain constant regardless of changes in activity levels
The total cost of production
The cost of labor
#10
In cost-volume-profit analysis, what happens to the contribution margin ratio as sales volume increases?
It increases
It decreases
It remains constant
It fluctuates depending on other factors
#11
Which of the following statements about incremental analysis is true?
It focuses on changes in total costs only
It compares total costs between alternatives
It considers both quantitative and qualitative factors
It is not useful in decision-making
#12
What is the concept of 'relevant range' in cost analysis?
The range of activity over which the assumptions of cost behavior are valid
The range of activity where all costs are fixed
The range of activity where all costs are variable
The range of activity where marginal costs exceed fixed costs
#13
What is the formula to calculate the payback period of an investment?
Initial investment / Net present value
Initial investment * Discount rate
Initial investment / Annual cash inflow
Initial investment / Annual cash inflow - Annual depreciation
#14
What is the formula to calculate the return on investment (ROI)?
(Net profit + Dividends) / Initial investment
Net profit / Initial investment
Net profit / Total assets
Net profit / Sales revenue
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