Chapter 13

True or false: Depreciation of existing assets is relevant to decisions.

False

Which of the following can make a product line look less profitable than it really is?

allocated common fixed costs

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

cost of the car

The first step in decision making is to...

define the alternatives

A future cost that is not the same between any two alternatives

differential, incremental, or avoidable cost

an increase in cost between two alternatives is a _____ cost

differential/incremental

differential costs are also known as

incremental, avoidable

When deciding whether to drive your car or take a train to a destination, the costs for your car insurance and driver's license are ______ costs.

irrelevant

Two or more products produced from a common input are called...

joint products

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

make or buy

Space being used that would otherwise be idle has a(n) ____ cost of 0.

opportunity

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

opportunity

Costs and benefits that always differ between alternatives are _____ costs and benefits.

relevant

Costs that have no impact on future cash flows and are irrelevant to decisions are _______ 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 segment margin from the best alternative use of the resource

When demand for products exceeds the production capacity, a(n) _________ decision must be made. (Enter only one word per blank.)

volume trade off

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

False

Some decisions have only one alternative and cannot consider steps in decision making. T/F

False

One of the great dangers in allocating common __________ costs is that such allocations can make a product line look less profitable than it really is.

fixed

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(n) ______ cost.

irrelevant

joint costs are...

irrelevant in decisions regarding what to do with a product after split-off

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

sunk

When making a decision ____ costs and benefits should to be included in the analysis.

relevant (only)

What should not be included in the analysis when making a decision: sunk, avoidable, opportunity, non-differential future costs

sunk and non-differential future costs