chp 11

when planning a trip and deciding to drive your car or take the train, gasoline is an _____ cost

relevant

it is profitable to continue processing a joint product after the split- off point, so long as the incremental ______ from such processing exceeds the incremental processing cost incurred after the split off point

revenue

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

sell or process further decision

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 incurred and cannot be avoidable regardless of what a manager decides to do is referred to as an _____ costs

sunk

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 _______ product

joint

which of the following are ways in which to calculate the benefit of selecting one alternative over another

-an analysis that just looks a the relevant costs and benefits. -the difference between the net operating income for the two alternatives. -an analysis that looks at all costs and benefits and identifies those that are differential.

This is the first step in the decision making process

-define the alternatives -identify relevant costs and benefits

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.

synonyms for differentials costs include ______ costs

-incremental -avoidable

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

when making a volume-trade off decision, managers should ignore

fixed costs

being less dependent on suppliers and making profits on both parts and the final product are advantages of ______ _______

vertical integration

which term refers to a company that is involved in more than on activity in the value chain

vertical integration

to effectively deal with a constraint

- effort should be focused on the weakest link - improvements should focus on the constraint

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

- non differential future costs -sunk costs

when making a decision to either buy a movie ticket or rent a DVD, the cost of the movie ticket is an example of an ______ cost

-incremental -avoidable

costs and benefits that should be ignored when making decisions are called ______ costs and benefits

-irrelevant

a decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier, is a called a(n) __ or __ decision.

-make -buy

when selecting one alternatives over another, opportunity costs

-represent foregone economic benefits - are sometimes zero

a company is considering buying a component part that they currently make. which of the following items related to the equipment currently being used to make the components are relevant to the decision

-salvage value -alternative uses for the equipment

an increase in cost between two alternatives is an ______ cost

incremental

in order to prevent confusion and keep attention focused on critical information it is desirable to

isolate relevant costs from irrelevent costs

if a cost is traces to a segment using activity-based costing, it

may or may not be an avoidable cost fo the segment

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

opportunity

when considering decision alternatives, both relevant and irrelevant costs are included when using the ______ _____ approach

total cost

activities ranging from development to production to after-sale service are called an _______ _______

value chain

when should a special order be accepted

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

which of the following techniques describe how a bottleneck should be managed

1. find ways to increase the capacity of the bottleneck 2. focus business process improvement efforts on the bottleneck 3. ensure there is minimal lost time at the bottleneck due to breakdowns and set-ups

potential advantages of dropping a product line or other segment include

an overall increase in net operating income -avoiding more fixed costs than the company loses in contribution margin.

when a manger increases the capacity of constraint or ______ it is called relaxing the constraint

bottleneck

when dealing with a constrained resource, managers should focus their attention on managing the

bottleneck

anything that prevents you from getting more of what you want is an _____

constraint

if some products must be cut back because of a constraint, produce the products with the highest

contribution margin per unit of constrained resource

when considering decision alternatives only relevant costs are included when using the _________ _______ approach

differential cost

which of the following is an advantage of buying a part instead of making it?

economies of scale can result in higher quality and lower costs from suppliers.