ACCT 2210 - SMITH EXAM 4
Avoidable cost
a cost that can be eliminated by choosing one alternative over another in a decision
what is a sunk cost
a cost that has already been incurred and cannot be avoided regardless of what a manager decides to do
which of the following may be an advantage to making a part rather than buying it
a smoother flow of parts and materials for production and less dependence on outside suppliers
what is the greatest danger of allocations
allocating common fixed costs and it can make it seem as if a product is less profitable than it really is
which of the following are ways in which to calculate the benefit of selecting one alternative over another
an analysis that just looks at the relevant costs and benefits. an analysis that looks at all costs and benefits and identifies those that are differential. the difference between the net operating income for the two alternatives
what is an exchange of dropping a product line or other segment
an overall increase in net operating income and avoiding more fixed costs than the company loses in contribution margin
the machine or process that is limiting overall output is called
bottleneck
Joint costs
cannot be avoided once a process is started and are irrelevant in decisions regarding what to do with a product after split-off
when determining which product or service makes the best use of a constrained resource, a company has to determine which course of action will maximize the companys total
contribution margin
If some products must be cut back because of a constraint, produce the products with the highest:
contribution margin per unit of constrained resource
what are synonyms to avoidable costs
incremental and differential costs
when deciding whether to fly or take the train on a trip, the cost of putting your pet in a boarding facility while you are away is a ______ Cost
irrelevant
in order to prevent confusion and keep attention focused on critical information, it is desirable to
isolate relevant costs from irrelevant costs
Managers may choose to retain an unprofitable product line because it
it helps sell other products because it attracts customers
the costs incurred up to the split off point in a process in which two or more products are produced from a common input are known as _____ costs
joint
two or more products that are produced from a common input are known as _____ products
joint
what involves determining whether to carry out an activity in the value chain internally or use a supplier
make or buy decision
if a cost is traced to a segment using activity based costing it
may or may not be an avoidable cost of the segment
Any final decision to drop or add a business segment is going to hinge primarily on the impact the decision will have on net _____ _____.
operating income
how is it possible to increase capacity of a bottleneck
relaxing the constraint
when making a decision whether to drive or take the train on a trip, the cost of a train ticket is a
relevant cost
When making a decision to continue using a current machine versus purchasing a new machine, what type of costs need to be included in the analysis
relevant costs
what refers to the costs that always differ between alternatives
relevant costs
deciding what to do with a joint product at the split off point is a _________
sell or process further decision
which of the following are ways to increase the capacity of a bottleneck
shifting workers from processes that are not bottlenecks to the process that is the bottleneck. investing in additional machines at the bottleneck
a one-time order that is not considered part of the company's normal ongoing business
special order decision
the ______ __ ______ is the point in the manufacturing process at which the joint products can be recognized as separate products
split off point
if a company is using a resource that could be used for some other purpose, the opportunity cost of that resource
the profit from the best alternative use of the resource
allocating joint costs to products at the split off point is misleading for decision making about the products
true
a _____ _____ includes activities ranging from development to production to after sales service
value cahin
________ ________ can help companies control quality better by producing their own parts and materials rather than relying on the quality control standards of outside suppliers
vertical integration
when should a special order be accepted
when the incremental revenue from the special order exceeds the incremental costs of the order