A202 CH12

A cost that can be eliminated in whole or in part by choosing one alternative over another is an

AVOIDABLE cost.

Dropping a product line enables a company to drop the products...

AVOIDABLE fixed costs.

DIRECT Fixed Costs:

Associated with a particular product.

A Business segment should only be dropped if a company can save more in _blank_ costs than it loses in contribution margin.

Fixed Costs

Fixed costs and sunk costs ARE NOT the same thing

Fixed costs and sunk costs ARE NOT the same thing

COMMON Fixed Costs

For good of the whole organization

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

Sell or process further decision (Sprinkle donuts).

Variable cost and Relevant Cost ARE NOT the same thing

Variable cost and Relevant Cost ARE NOT the same thing

Which are avoidable costs?

differential and incremental.

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

make or buy decision.

The costs provided by a well-designed activity-based costing system are:

potentially relevant to a decision.

A company should consider _blank_ when making a decision.

Relevant costs and benefits.

Only those costs and benefits that differ in total between alternatives are _blank_ in a decision.

Relevant. (aka differential cost and differential revenue)

Contribution Margin

Sales minus variable cost.

An incremental cost is

adding ONE MORE

When analyzing a special order, only the_blank_ are relevant.

incremental costs and benefits

A joint product should be processed after split off if the

incremental revenue after split off exceeds the incremental processing cost after split off