Chapter 7 Accounting II

constrained

A___________ resource requires a manager prioritize how products are produced.

opportunity cost

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

Segment margin

Sales revenue minus all fixed and variable costs attributable to a particular division is:

true

T/F qualitative factors should be considered in special order decisions

false

T/F when making a decision, only quantitative factors should be considered

contribution margin per unit of constraint

when a constraint exists, companies need to focus on maximizing

opportunity costs

when considering a keep or decision, it is important to consider ________ such as elimination of the segment free resources that could be used in another way.

when the incremental revenue exceeds the incremental manufacturing cost

when is it profitable to continue processing a product instead of selling it as is

irrelevant costs

when making decisions, managers should ignore

common fixed costs

when performing a keep-or-drop analysis _______ should be excluded from the analysis

relevant cost

when planning a trip and deciding to drive or take the train, gasoline is a

excludes fixed costs

when there is excess capacity, an analysis of a special order

variable production costs of the product

which is not a qualitative factor to consider in a make-or-buy decision

special-order decision

short term management decision made using differetial analysis and manageent decision in which fixed manufacturing overhead is ignored as long as there is enough to need the buter

evaluate costs and benefits of alternatives

step 3 of the managment decision making process

first

the __________ step in the decision making process is to identify the decision problem

highest contribution margin per unit of the constrained resource

to maximized total contribution margin when a constrained resource exists, produce the products with the

avoidable cost

a cost that can be eliminated in whole or in part by choosing one alternative over another

special order decisions

an order that is outside the scope of normal sales is

direct fixed cost

can be traced to a specific business segment

differential analysis

comparing the costs and benefits of decision alternatives is done using _________ because it focuses on factors that will change between the decision alternatives

incremental analysis

comparing the relevant costs and benefits of an alternative decision choice is

keep-or-drop decisions

continue or discontinue decisions are commonly know as

differential costs

costs that change across differential

sell or process further decision

deciding what to do with a product that is ready to sell or could be enhanced is a

excess capacity

exists when a company has not yet reached the limit on its resources

identify the decision problem

first setep of the managment decision-making process

hiring more workers and increasing capacity

in the long term, companies can manage constrained resources by:

full capacity

opportunity costs become relevant when a company is operating at

bottleneck

process that limits overall output is

substitute products

products that can be used in place of one another are called

Make or buy

A __________ decision is a decision to carry out an activity internally or buy externally from a supplier.

fixed

A business segment should only be dropped if a company can save more in ______ costs than it loses in contribution margin

Sunk costs

A cost that has already been incurred and can't be avoided regardless of what a manager decides to do is referred to as....

is a critical step in the decision making process

Determining decision alternatives:

1. Identify the decision problem 2. determine the decision alternatives 3. Evaluate the costs and benefits 4. Make the decision 5. Review the results

Put the steps in the decision making process in order:

differ between alternatives & occur in the future

Relevant costs:

bottleneck

resource tha is insufficient to meed the demands placed on it

likely to be unexpected costs and benefits, feedback is important, and corrections may be needed

reviewing results of decisions is vital because: