chapter 6
fixed
A business segment should only be dropped if a company can save more in ____ costs than it loses in contribution margin. Variable fixed costs are included in the contribution margin.
constraint
Anything that prevents you from getting more of what you want is a(n)
relevant
Costs and benefits that always differ between alternatives are ______ costs and benefits.
irrelevant
Costs and benefits that should be ignored when making decisions are called _____ costs and benefits.
sell or process further
Deciding what to do with a joint product at the split-off point is ______ decision.
sell or process or further
Deciding what to do with a joint product at the split-off point is a(
profit
Effectively managing an organization's constraints is a key to increased
two
Every decision has at least ______ alternative(s).
the segment margin from the best alternative use of the resource
If a company is using a resource that could be used for some other purpose, the opportunity cost of that resource is
vertical integration
Less dependence on suppliers is an advantage of
incremental avoidable
Synonyms for differential costs include Blank______ cost.
potentially
The costs provided by a well-designed activity-based costing system are. ______relevant to decision
joint products
Two or more products produced from a common input are called
joint
Two or more products that are produced from a common input are known as
sunk
What type of cost is never relevant and should be disregarded when making decisions?
fixed costs
When making a volume-trade off decision, managers should ignore
contribution margin
A business segment should only be dropped if a company can avoid more in fixed costs than it gives up in
variable overhead outside purchase price
A company is considering buying a component part that they currently make using some existing equipment. Relevant costs to this sourcing decision include
must trade off units of one product for units of another do not have enough capacity to satisfy all product demand
A company must make a volume trade-off decision when they
avoidable
A cost that can be eliminated in whole or in part by choosing one alternative over another is a(n)
differential
A future cost that is not the same between any two alternatives is known as differential,, incremental, or avoidable cost.
contraint
A limited resource of some type that restricts the company's ability to satisfy demand is a(n)
incremental avoidable
When making a decision to either buy a movie ticket or rent a DVD, the cost of the movie ticket is an example of a(n)
relevant
When planning a trip and making a decision to drive or take the train, the cost of car repairs and maintenance is a(n). cost.
intermediate
when a product is past the split-off point, but is not yet a finished product, n) intermediate
may or may not be
If a cost is traced to a segment using activity-based costing, it
joint
The split-off point is the point in the manufacturing process at which the products can be recognized as separate products.
irrelevant
When deciding whether to drive your car or take a train to a destination, the costs for your car insurance and driver's license are ______ costs.i
volume trade off
When demand for products exceeds the production capacity, a Blank______ decision must be made.
special
A one-time order that is not considered part of the company's normal ongoing business is called a
Sourcing
Determining whether to carry out an activity in the value chain internally or use a supplier is a______ decision special order This is a one time order outside of normal business. product line)Dropping a product line would mean dropping the product as a whole, whereas this question refers to deciding to control all steps or just a few. This is an allocation of resources decision.(utilization of a constrained resource)
irrelevant
Future costs and benefits that do not differ between alternatives are Blank______ costs to the decision-making process.
false
Opportunity costs are not found in accounting records because they are not cash outlays. Opportunity costs are relevant to decisions.
Opportunity costs
Opportunity costs are not found in accounting records because they are not relevant to decisions.
define the alternatives
The first step in decision making is to Blank______.
split-off
The point in the manufacturing process at which joint products can be recognized as separate products is called the
opportunity
The potential benefit given up when selecting one alternative over another is a(n)_____ cost
Total contribution margin
When a constraint exists, companies need to focus on maximizing _____
Zero
When a resource, such as space in the factory, has no alternative use, its opportunity cost is
Intermediate product
As it applies to sell or process further decisions, which term refers to a product that is in the process of being made?
special order
A one-time sale that is not considered part of the company's normal ongoing business is referred to as a(n)
Both the original purchase price and annual depreciation expense.
When making a decision whether to keep an existing piece of equipment or replace it, which of the following is (are) considered a sunk cost?
relevant
When planning a trip and deciding to drive your car or take the train, gasoline is a(n) Blank______ cost. The gasoline is a future—not a past—cost, so it is not a sunk cost.(sunk) If you take the train you would not have to purchase gasoline which makes it a relevant cost. (irrelevant)
sourcing
Whether to perform various organization activities such as payroll and accounting internally or use an external provider is _______ decision.
Allocated common fixed costs
Which of the following can make a product line look less profitable than it really is? Multiple choice question.
Less dependence on outside suppliers. A smoother flow of parts and materials for production.
Which of the following may be advantages of making a part rather than buying it (i.e. vertical integration)?
Sunk costs Non-differential future costs
Which of the following should not be included in the analysis when making a decision? Opportunity costs represent the next best use of the resource and should always be considered Avoidable costs are relevant to decisions.
fixed
One of the great dangers in allocating common ____ costs is that such allocations can make a product line look less profitable
increase the capacity of the bottleneck
When there is a constrained resource, the best way to increase profits is to
Reason: The avoidable costs of making the product are the variable costs plus the supervisor salary or $15 per unit. The total savings is $60,000 ($18 buy price - $12 variable cost - $3 supervisor salary = $3 advantage to make × 20,000 u
Andrews Co. can purchase 20,000 units of Part XYZ from a supplier for $18 per part. Andrews' per unit manufacturing costs for 20,000 units is as follows: Cost Per Unit Total Variable manufacturing cost $12 $240,000 Supervisor salary $3 $60,000 Depreciation $1 $20,000 Allocated fixed overhead $7 $140,000 If the part is purchased, the supervisor position will be eliminated. The special equipment has no other use and no salvage value. Total allocated fixed overhead would be unaffected by the decision. The company should Blank______. Multiple choice question.
Reason: The revenue per tire is $70 and the cost is $63 (direct materials, direct labor, variable overhead and inspection fee of $10 ($100,000 ÷ 10,000 tires) so each tire will generate $7 in net operating income or $70,000 total.
Goodstone Tire Corporation sells tires for $100 each. Per unit costs associated with producing and selling the tires are: Direct materials and labor $45; Factory overhead $20; Selling and administrative $15. The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 10,000 tires for $70 each. The order would not require any selling or administrative costs. The purchaser will pay the shipping costs, but Goodstone will have to pay a $100,000 inspection fee in order to be able to make the foreign sale. Accepting the special order will not affect current sales or production. What effect would accepting the special order have on Goodstone's net operating income?
