Cost: Chapter 11 HW - Decision Making
Operating at or near full capacity will require a firm considering a "special sales order" to potentially recognize the
opportunity cost from lost sales
Which of the following concepts is correct for determining relevant costs for decision making
Differential
A cost is not relevant for decision making if it
Does not differ for each option available to the decision maker
VC will generally be RELEVANT for decision making because they
Have not been committed and are likely to differ between decision options
The opportunity cost of making a component part in a factory with no excess capacity is the
Net benefit foregone from the best alternative use of the capacity required
When deciding to purchase a new cutting machine or continue using an existing machine, the following costs are all relevant except the:
Original cost of the old machine
In making a decision whether to accept or reject a "special sales order", managers need critical information about all of the following except
Prior period operating costs
When deciding whether to discontinue a segment of a business, managers should focus on
The total CM generated by the segment relative to any traceable (avoidable) FC associated with the segment
Which of the following statements regarding "opportunity costs" is true?
These costs relate to the benefit lost or foregone when a chosen option precludes the benefit of the alternative option from being realized
All of the following are characteristics of relevant costs except
They are inventory-related costs
FC will often be irrelevant for short-term decision making because they
Typically dont differ betwen decision alternatives being considered
Done on a regular basis, relevant cost pricing in "special order decisions" can erode normal pricing policies and lead to
a decrease in a firms long-term profitability
a useful device or concept for solving production problems involving multiple products and limited recourses is
contribution per unit of scarce resource
The decision to keep or drop products or services involves strategic consideration all of the following except
the desired inventory levels of the product