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The formula to calculate the target cost includes

-desired profit per unit -anticipated selling price

Which of the following should not be included in the analysis when making a decision

-non differential future costs -sunk costs

To calculate the optimal selling price using Microsoft Excel's solver requires

-percentage change in selling price -current unit sales -current selling price

The absorption costing approach to cost plus pricing

-relies on forecasted unit sales -assumes that customers will pay whatever price the company decides to charge

The formula used to calculate markup percentage on absorption cost includes:

-required ROI multiplied by investment -selling, general, and administrative expenses -unit product cost multiplied by unit sales

Irrelevant costs include

-sunk costs -future costs that do not differ between alternatives

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

The target costing approach was developed because

- the market really determines prices - most of a products cost is determined in the design stage

The absorption costing approach to cost plus pricing

-assumes that customers will pay whatever price the company decides to charge -Relies on forecasted unit sales

A company must make a volume trade off decision when they

- do not have enough capacity to satisfy the demand for all of its products - must trade off units of one product for units of another due to limited production capacity

Given a reference value of $3500 and a differential value based will be greater than or equal to $_______ and less than or equal to $__________

3500 and 4700

Anything that prevents you from getting more of what you want is an

constraint

The machine or processes that is limiting overall output is called an

constraint

when a constraint exists, companies need to focus on maximizing

contribution margin per unit of constraint

When a company applies a predetermined markup to a cost base to determine the selling price, it is using

cost plus

When making a decision, only relevant items are included in the analysis of the alternatives when using

differential cost approach only

The price of a customer's best available alternative plus the value of what differentiates the product from that alternative is the products

economic value to the customer

One of the great dangers in allocating common __________ costs is that such allocations can make a product line look less profitable than it really is.

fixed

In general the less sensitive customers are to price the ______ the optimal selling price will be

higher

Companies that use _______ _________ pricing establish selling prices based on the economic worth of benefits their goods and services provide to customers

value based

Companies that use _________ _________ pricing establish selling prices based on the economic worth of benefits their goods and services provide to customers

value based

Activities ranging from developments to production to after sales service are called an

value chain

Being less dependent on suppliers and making profits on both parts and the final product are advantages of

vertical integration

When a company is involved in more than one activity in the entire value chain it is

vertically integrated

When is it profitable to continue processing a joint product after the split-off point?

when incremental revenue exceeds the incremental processing cost

When should a special order be accepted

when the incremental revenue from the special order exceeds the incremental costs of the order

When a manager increases the capacity of constraint or ______ it is called relaxing the constraint

bottleneck

Customers and competitors play important roles in determining a company's price

ceiling

Synonyms for differential costs include

incremental and avoidable

A company's price floor is determined by

incremental costs

Generally speaking, managers should set higher prices when demand is

inelastic

When deciding whether to drive your care or take a train to a destination , the costs for your care insurance and drivers license are

irrelevant costs

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

joint costs

Two or more products produced from a common input are called

joint products

If by dropping a product line, a company cannot avoid as much in fixed costs as it loses in contribution margin, the company should

keep the product line

A decision to carry out one of the activities in the value chain internally rather than to buy externally from a supplier is called an

make or buy decision

The potential benefit given up when selecting one alternative over another is an

opportunity cost

When considering decision alternatives, both relevant and irrelevant costs are included when using the

total cost

The process of determining the maximum allowable cost for a product and developing a profitable prototype is called

Target costing

The first step in decision making is to

define alternatives

The degree to which a change in price affects unit sales of a product or service is the

price elasticity of demand

Effectively managing an organization's constraints is a key to increased

profits

Space being used that would otherwise be idle has a(n) __________ cost of zero.

relevant

When making a decision only___________ costs and benefits should to be included in the analysis

relevant

Steps in the absorption costing approach are

- multiply unit product cost by 1+ markup percentage -determine markup percentage on absorption cost -calculate unit product costs

It is assumed under the _____________ ______________ approach that customers are required to buy a product at whatever price the seller deems appropriate

absorption costing

When planning a tripe and deciding whether to drive or fly the _______ is a sunk cost and should be ignored

original cost of the car

Product markup is generally expressed as an

percentage of cost

A cost that can be eliminated by choosing one alternative over another is an

relevant cost

Deciding what to do with a joint product at the split off point is an _________ or ____________ ______________ decision

sell or process further

A one time sale that is not considered part of the company's normal ongoing business is referred to as an ________ decision

special order

A cost that has already been made and cannot be recovered is called a

sunk cost

anticipated selling price - desired profit =

target cost


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