Ch.23 Learn Smart – Flashcards
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The decision rule for segment elimination is to consider eliminating a segment if the segment revenues are less than the segment ____ expenses
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avoidable
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When making additional business decisions, management should consider (4)
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1. existing sales 2. incremental revenues 3. incremental costs 4. available capacity
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In a make or buy decision, management should consider (4)
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1. available capacity 2. incremental costs 3. employee morale 4. product quality
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When making sell or process decisions, management should consider (3)
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1. revenue from selling as is 2. incremental costs of processing further 3. revenue from selling after further processing
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Relevant ____ refer to the additional or incremental revenues generated by selecting a particular course of action over another.
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benefits
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List the steps of the decision making process, with the first one as 1 (5)
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1. define task and goal 2. identify alternative actions 3. collect relevant information 4. select course of action 5. analyze and assess decision
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When making keep or replace equipment decisions, management should consider (3)
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1. operating cost of the old equipment 2. operating cost of the new equipment 3. trade-in allowance on the old equipment
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When production facilities are limited, the company should produce the mix that will not exceed demand and maximize the production of the product with the
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highest contribution margin per unit of scarce resources
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A ____ cost is the potential benefit lost by taking a specific action when two or more alternative choices are available.
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opportunity
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A student is deciding whether to take an additional class or work extra hours. Which amounts are relevant to this decision? (3)
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1. tuition for the class 2. cost of textbook 3. hourly wages
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A ____ cost arises from a past decision, can't be avoided or changed, and is irrelevant to future decisions.
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sunk
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When making scrap or rework decisions, management should consider (3)
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1. lost profit on making and selling new units while reworking defective units 2. revenue from selling defective units as scrap 3. incremental costs
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____ costs, also called differential costs, are the additional costs incurred if a company pursues a certain course of action.
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Incremental
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When considering _____ of a segment, management should look at more than the segment's performance report.
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elimination
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When making decisions, managers should consider all relevant costs, which include (3)
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1. incremental costs 2. opportunity costs 3. out-of-pocket costs
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_____ are pertinent, but not relevant to future decision making since a ____ will not make a difference in the decision.
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sunk cost, sunk cost
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An ____ cost requires a future outlay of cash and is relevant for current and future decision making.
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out-of-pocket
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An ____ expense is the amount that would continue if a segment is eliminated.
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unavoidable
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The total ___ method of setting prices includes the product's total costs plus a desired profit.
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cost
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When determining a product price, what should be taken into account (4)
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1. fixed cost 2. profit margin 3. variable costs
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An ___ expense is the amount a company would not incur if a segment is eliminated
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avoidable
