Learnsmart - Chapter 12

What are ways to increase the capacity of a bottleneck?

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

Allocated common fixed costs

Can make a product line look less profitable than it really is

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

special order

When making decisions, managers should ignore what costs?

sunk

If a company is using a resource that could be used for some other purpose, the opportunity cost of that resource is

the profit from the best alternative use of the resource

What is the point in which the manufacturing process at which joint products can be recognized as separate products

Spilt- off point

What are advantages of making a part rather than buying it?

- A smoother flow of parts and materials for production - Less dependence on outside suppliers

Two or more products that are produced from a common input are known as?

Joint products

The machine or process that is limiting overall output is called a

bottleneck

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

avoidable

When making a decision to either go to a movie or rent a DVD, choosing the movie instead of the DVD means that the cost of renting the DVD would be eliminated. This is an

avoidable cost relevant cost

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 a shortage or limited resource of some type restricts a company's ability to satisfy demand, the company has 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

Improper allocation of joint costs can lead to

incorrect decisions

Allocation of joint costs is needed for

inventory valuation

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

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

Which costs should be included in the analysis when making a decision?

- avoidable costs - relevant costs - differential costs - opportunity costs

Costs that differe between alternative are called?

Differential costs

If a company has more than one potential constraint, the proper combination of products can be found by use of quantitative method known as

linear programming

The decision to add or drop a product line should be based on the impact the decision will have on ...

net operating income

Joint costs are common costs that are incurred to

produce two or more units

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

profits

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

Make or buy decision