ACC 208 - Chapter 7 LS

Which of the following statements are true?

-Allocation of joint costs is needed for inventory valuation -Joint costs are common costs that are incurred to produce two or more products -Improper allocation of joint costs can lead to incorrect decisions

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

Joint costs...

-Cannot be avoided once a process is started -Are irrelevant in decisions regarding what to do with a product after split-off

When making a decision to either buy a movie ticket or rent a DVD, the cost of the movie ticket is an example of a(n) _____ cost.

-Incremental -Avoidable

What is the typical approach to allocating joint costs to products?

Allocating the cost based on the relative sales value of the end products

A cost that can be eliminated by choosing one alternative over another is a(n) _____ cost.

Avoidable

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

Bottleneck

A business segment should only be dropped if a company can avoid more in fixed costs than it gives up in...

Contribution margin

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

Contribution margin per unit constrained resource

T/F: Opportunity costs are not found in accounting records because they are not relevant to decisions

False

When there is a constrained recourse, the best way to increase profits is to...

Increase the capacity of the bottleneck

The costs provided by a well-designed activity-based costing system are _____ relevant to a decision.

Potentially

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

Relevant

When planning a trip and deciding to drive or take the train, gasoline is a(n) _____ cost.

Relevant

When making a decision to drive or take the train on a trip, the cost of the train ticket is a:

Relevant cost

Which of the following are ways to increase the capacity of a bottleneck?

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

One of the benefits of dropping a product line is that a company can eliminate the product's line's _____ fixed costs.

Avoidable

When a storage or limited resources of some type of some type restricts a company's ability to satisfy demand, the company has a(n) _____.

Constraint

When the total amount of the cost will be the same regardless of the alternatives selected in a decision, what should be done about the cost in the decision analysis?

Ignore the cost

Bad decisions can easily result from erroneously including _____ costs and benefits when analyzing alternatives.

Irrelevant

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

The split-off point is the point in the manufacturing process at which the _____ products can be recognized as separate products.

Joint

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

Joint

The potential benefit given up when selecting one alternative over another is a(n) _____ cost.

Opportunity

When planning a trip and deciding whether to drive or fly, _____ is a sunk cost and should be ignored.

Original cost of the car

When making a decision to continue using a current machine versus purchasing a new machine, what type of costs need to be included in the analysis?

Relevant

A one-time order that is not considered part of the company's normal ongoing business is a _____ order.

Special

Activities ranging from development to production to after-sales service are called a(n) _____ _____.

Value chain

Which of the following may be an advantage of making a part rather than buying it?

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

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

Opportunity

Only rarely will enough information be available to prepare a detailed income statement for both alternatives in a decision. This makes isolating _____ costs desirable.

Relevent

Deciding what to do with a joint product at the split-off point is a(n) _____ or _____ _____ decision.

Sell or process farther

When making decisions, managers should ignore _____ costs.

Sunk

When a company is involved in more than one activity in the entire value chain, it is _____ _____.

Vertically integrated

Which of the following techniques describe how a bottleneck should be managed?

-Focus business process improvement efforts on the bottleneck -Ensure there is minimal lost time at the bottleneck due to breakdowns and set-ups -Find ways to increase the capacity of the bottleneck

Which of the following are synonyms for avoidable costs?

-Incremental Cost -Differential cost

Which of the following statements is true?

Each decision needs to be analyzed carefully to determine relevant costs.

Costs that have already been incurred and cannot be avoided regardless of what a manager decides to do are _____ costs.

Sunk

Determining whether to carry out an activity in the value chain internally or use or use a supplier is a _____ decision.

Make or buy