Accounting ch 12
Deciding what to do with a joint product at the split off point is a
Sell or process further decision
What ways increase the capacity of a bottlenecks
Shifting workers from processes that are not bottleneck to the process that is the bottleneck Investing in additional machines at the bottleneck
Joint cost
The cost incurred up to the split off point in apricots in which two or more products are produced from a common input
Relevant benefit
is a benefit that differs between alternatives
Relevant cost
relevant cost that differs between alternatives
average cost per unit
variable production cost + additional fixed cost = total relevant cost / number of units =average number of units
Decision making: Two step process
1: eliminate cost and benefits hat don't differ between alternatives 2: use the remaining costs benefits that differ between alternatives in making the decision. The cost that remain are the differential, or avoidable, costs.
Special order
A one time order that is not considered part of the company's part of the normal ongoing business
Joint products
Are two or more product produced from a common input
Which of the following would be an advantage of dropping a product line or other segment
Avoiding more fixed cost than the company loses in contributed margin An overall increase in net operating income
Relevant cost
Cost that differ between alternatives
Synonyms of avoidable cost
Differential cost Incremental cost
When the total amount of the cost will be the same regardless of the alternative selected in a decesion, what should be done about the cost in the decision analysis
Ignore the cost
Sunk cost
In a cost that has already been incurred and cannot be avoided regardless of what a manger decides to do
The best way to handle a constrained resource is to __ the capacity of the bottleneck
Increase
When choosing between two alternatives, such as replacing a machine or not replacing the machine, do not include __ cost in the analysis because these cost will be the same under each alternative
Irrelevant
Avoidable costs
Is a cost that can be eliminated by choosing one alternative over another
Make or buy decision
Is a decision to carry out one of the activities in the value chain internally rather than to buy externally from a supplier
To prevent confusion and keep attention focused on critical information
Isolate relevant cost from irrelevant cost
The split off point is the point in the manufacturing process at which the __ products can be recognized as separate products
Joint
If a company has a resource that could be used for something else, the __ cost is the profit that could be derived fro the best alternative use of the resource
Opportunity