Cost: Chapter 11 HW - Decision Making

Operating at or near full capacity will require a firm considering a "special sales order" to potentially recognize the

opportunity cost from lost sales

Which of the following concepts is correct for determining relevant costs for decision making

Differential

A cost is not relevant for decision making if it

Does not differ for each option available to the decision maker

VC will generally be RELEVANT for decision making because they

Have not been committed and are likely to differ between decision options

The opportunity cost of making a component part in a factory with no excess capacity is the

Net benefit foregone from the best alternative use of the capacity required

When deciding to purchase a new cutting machine or continue using an existing machine, the following costs are all relevant except the:

Original cost of the old machine

In making a decision whether to accept or reject a "special sales order", managers need critical information about all of the following except

Prior period operating costs

When deciding whether to discontinue a segment of a business, managers should focus on

The total CM generated by the segment relative to any traceable (avoidable) FC associated with the segment

Which of the following statements regarding "opportunity costs" is true?

These costs relate to the benefit lost or foregone when a chosen option precludes the benefit of the alternative option from being realized

All of the following are characteristics of relevant costs except

They are inventory-related costs

FC will often be irrelevant for short-term decision making because they

Typically dont differ betwen decision alternatives being considered

Done on a regular basis, relevant cost pricing in "special order decisions" can erode normal pricing policies and lead to

a decrease in a firms long-term profitability

a useful device or concept for solving production problems involving multiple products and limited recourses is

contribution per unit of scarce resource

The decision to keep or drop products or services involves strategic consideration all of the following except

the desired inventory levels of the product