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