ACC 101/102 - Ch 7

When a company is operating at full capacity, a special-order analysis ______.

includes the opportunity cost of lost sales

Comparing the costs and benefits of decision alternatives is done using........analysis because it focuses on the factors that will change between the decision alternatives

incremental or differential

Determining decision alternatives ______.

is a critical step in the decision-making process

When the total amount of the cost will be the same regardless of the alternatives selected in a decision, the cost should be ______ when doing decision analysis.

excluded

When there is excess capacity, an analysis of a special order ______.

excludes fixed costs

Reviewing the results of a decision ______.

is an important final step in decision making

The process of making a decision ______.

is basically the same for all decisions

It is important to review the results of decisions because ______.

feedback is an important component of managerial accounting corrective action may be needed there are likely to be unexpected costs and benefits

Incremental analysis ______.

may be referred to as relevant costing is also called differential analysis

An analysis of a special order ______.

should consider the impact on regular customers is only valid when excess capacity exists

Goodstone Tire Corporation sells tires for $90 each. Per-unit costs associated with producing and selling the tires are: Direct materials $35 Direct labor 10 Factory overhead 20 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming that Goodstone has excess capacity, ______.

the incremental profit from the special order will be $12,000

Goodstone Tire Corporation sells tires for $90 each. Per-unit costs associated with producing and selling the tires are: Direct materials $35 Direct labor 10 Factory overhead 20 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming that Goodstone has no excess capacity, ______.

the loss from accepting the special order will be $25,000

Once you have identified a problem, the next step is to determine the possible solutions, which are called

Decisions Alternative

If a company has a resource that could be used for something else, the.......ost is the profit that could be derived from the best alternative use of the resource

Opportunity

Which of the following is NOT a qualitative factor to consider in a make-or-buy decision?

The variable production costs of the product.

True or false: Incremental analysis is a decision-making approach that compares the relevant costs and benefits of decision alternatives.

True

Which of the following is NOT a qualitative question to ask when in a make-or-buy decision?

What is the cost difference between the two alternatives?

When making a decision, ______ should be considered.

both quantitative and qualitative data