Accounting ch 12

Deciding what to do with a joint product at the split off point is a

Sell or process further decision

What ways increase the capacity of a bottlenecks

Shifting workers from processes that are not bottleneck to the process that is the bottleneck Investing in additional machines at the bottleneck

Joint cost

The cost incurred up to the split off point in apricots in which two or more products are produced from a common input

Relevant benefit

is a benefit that differs between alternatives

Relevant cost

relevant cost that differs between alternatives

average cost per unit

variable production cost + additional fixed cost = total relevant cost / number of units =average number of units

Decision making: Two step process

1: eliminate cost and benefits hat don't differ between alternatives 2: use the remaining costs benefits that differ between alternatives in making the decision. The cost that remain are the differential, or avoidable, costs.

Special order

A one time order that is not considered part of the company's part of the normal ongoing business

Joint products

Are two or more product produced from a common input

Which of the following would be an advantage of dropping a product line or other segment

Avoiding more fixed cost than the company loses in contributed margin An overall increase in net operating income

Relevant cost

Cost that differ between alternatives

Synonyms of avoidable cost

Differential cost Incremental cost

When the total amount of the cost will be the same regardless of the alternative selected in a decesion, what should be done about the cost in the decision analysis

Ignore the cost

Sunk cost

In a cost that has already been incurred and cannot be avoided regardless of what a manger decides to do

The best way to handle a constrained resource is to __ the capacity of the bottleneck

Increase

When choosing between two alternatives, such as replacing a machine or not replacing the machine, do not include __ cost in the analysis because these cost will be the same under each alternative

Irrelevant

Avoidable costs

Is a cost that can be eliminated by choosing one alternative over another

Make or buy decision

Is a decision to carry out one of the activities in the value chain internally rather than to buy externally from a supplier

To prevent confusion and keep attention focused on critical information

Isolate relevant cost from irrelevant cost

The split off point is the point in the manufacturing process at which the __ products can be recognized as separate products

Joint

If a company has a resource that could be used for something else, the __ cost is the profit that could be derived fro the best alternative use of the resource

Opportunity