Ch 8 review
Which of the following is a sunk cost?
Purchase price of vehicle to be traded in
In a special sales order decision, the special price must exceed the variable cost of filling the order. In other words, the special order must have
a positive contribution margin
Which of the following pairs are characteristics of price−setters?
cost-plus pricing and less competition
Sunk costs should be considered when deciding whether to sell a product as is or process it further.
false
Managers should consider all of the following when deciding whether to accept a special order, except
fixed costs that will not be affected by the order
All of the following are outsourcing considerations, except
how do our fixed cost compare to the outsourcing cost
Fixed costs that do not differ between two alternatives are
irrelevant to the decision
Unavoidable fixed costs are
irrelevant to the decision of whether to discontinue a product line because they will not differ between alternatives.
Common fixed costs that are allocated between departments are generally
irrelevant to the decision of whether to discontinue the department.
Outsourcing decisions are sometimes referred to as
make-or-buy decisions
All of the following are considerations for discontinuing a product or product line, except
not having any free capacity
When the extra revenue from processing further is less than the extra cost of processing further, the best decision would be to
not process further
Which of the following best describes a "sunk cost"?
Costs that were incurred in the past and cannot be changed
A "relevant cost" is best described by which of the following?
Expected future costs that differ among alternatives
A "sales mix" is best described by which of the following?
The relative number of all products to be sold
"Total cost of product or service" is best described as which of the following?
all cost incurred along the value chain in connection with the product or service
Managers must consider which of the following when pricing a product or service
all costs
Fixed costs that are allocated among all departments are known as
common fixed costs
The factor that restricts production or sale of a product is which of the following?
constraint
The format of the income statement most useful in decision−making is which of the following?
contribution margin format
Companies with production constraints and irrelevant fixed costs will be most profitable when they maximize production of the product with the highest
contribution margin per unit of the constraint
The contribution margin per unit of constraint is calculated as
contribution margin per unit times × units per constraint
Fixed costs that may be avoided in the future are referred to as
relevant costs
In deciding whether to outsource, managers must consider
relevant fixed and variable componets
In a special sales order decision, incremental fixed costs that will be incurred if the special order is accepted are considered to be
relevant to the decision
Target total cost is described by which of the following?
revenue at market price - desired profit
A company should ________ when making a short−term special decision.
separate variable costs from fixed cost
Which of the following could be a constraint for selling a product?
shelf space, available labor hours and store hours
Which of the following pairs are characteristics of price−takers?
target costing and new heavy competition
Bear Country Granola is considering selling premium granola. It already sells regular for $6.75/pound and would sell premium granola for $9.50/pound. The cost for organic grains for the premium granola would be $1.15/pound. A cost that would not be considered in this decision would be
the cost of refining the regular granola.
In a sell or process further decision, the company should process further if
the extra cost of processing further is less than the extra value
A manager should always reject a special order if
the special order price is less than the variable costs of the order.
Big−box retailers such as Lowe's are considered price−takers because
their products are not unique
Which of the following describes the products and services of companies that are price−setters?
they tend to be unique
The cost−plus price is described by which of the following?
total cost + desired profit
Fixed costs that continue to exist even after a product line is discontinued are called
unavoidable fixed costs
All of the following are product mix considerations except
which product has the most sunk costs?