ACCT 2210 - SMITH EXAM 4

Avoidable cost

a cost that can be eliminated by choosing one alternative over another in a decision

what is a sunk cost

a cost that has already been incurred and cannot be avoided regardless of what a manager decides to do

which of the following may be an advantage to making a part rather than buying it

a smoother flow of parts and materials for production and less dependence on outside suppliers

what is the greatest danger of allocations

allocating common fixed costs and it can make it seem as if a product is less profitable than it really is

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

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. the difference between the net operating income for the two alternatives

what is an exchange of dropping a product line or other segment

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

the machine or process that is limiting overall output is called

bottleneck

Joint costs

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

when determining which product or service makes the best use of a constrained resource, a company has to determine which course of action will maximize the companys total

contribution margin

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

contribution margin per unit of constrained resource

what are synonyms to avoidable costs

incremental and differential costs

when deciding whether to fly or take the train on a trip, the cost of putting your pet in a boarding facility while you are away is a ______ Cost

irrelevant

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

isolate relevant costs from irrelevant costs

Managers may choose to retain an unprofitable product line because it

it helps sell other products because it attracts customers

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 _____ products

joint

what involves determining whether to carry out an activity in the value chain internally or use a supplier

make or buy decision

if a cost is traced to a segment using activity based costing it

may or may not be an avoidable cost of the segment

Any final decision to drop or add a business segment is going to hinge primarily on the impact the decision will have on net _____ _____.

operating income

how is it possible to increase capacity of a bottleneck

relaxing the constraint

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

relevant cost

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 costs

what refers to the costs that always differ between alternatives

relevant costs

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

sell or process further decision

which of the following are ways to increase the capacity of a bottleneck

shifting workers from processes that are not bottlenecks to the process that is the bottleneck. investing in additional machines at the bottleneck

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

special order decision

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

split off point

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

the profit from the best alternative use of the resource

allocating joint costs to products at the split off point is misleading for decision making about the products

true

a _____ _____ includes activities ranging from development to production to after sales service

value cahin

________ ________ can help companies control quality better by producing their own parts and materials rather than relying on the quality control standards of outside suppliers

vertical integration

when should a special order be accepted

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