ACCT 212 HW 7 CH 10 – Flashcards
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the decisions 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 sell or process decisions, management should consider what?
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revenue from selling as is, incremental costs of processing further, and revenue from selling after further processing
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incremental costs to fill an order
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(DM + DL) x number of additional units= incremental costs to fill order EX: company gets an order of 10,000 units of product, standard costs of producing one unit is DM $4, DL $3 and Fixed OH $2. If order is accepted, total incremental costs to fill the order are? (4+3) x 10,000=$70,000. Fixed costs don't change so they are irrelevant
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when demand is unlimited and products use the same inputs, the company should produce the product with what?
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the highest contribution margin
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when making scrap or rework decisions, management should consider what?
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revenue from selling defective units as scrap, lost profit on making and selling new units while reworking defective units, and incremental costs
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when making additional business decisions, management should consider what?
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incremental revenues, incremental costs, existing sales, and available capacity
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steps of decision making process in order
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define task and goal, identify alternative actions, collect relevant information, select course of action, and analyze and assess decison
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cost that arises from a past decision, cannot be avoided or changed, and is irrelevant to future decisions
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sunk costs
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in a make or buy decision, management should consider what?
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available capacity, product quality, employee morale, and incremental costs
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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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costs aka differential costs, that are additional costs incurred if a company pursues a certain course of action
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incremental costs
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when making keep or replace equipment decisions, management should consider what?
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trade-in allowance on the old equipment, operating cost of old equipment, and operating cost of new equipment
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additional or incremental revenues generated by selecting a particular course of action over another
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releveant benefits
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potential benefit lost by taking a specific action when two or more alternative choices are available
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opportunity cost
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T/F when considering elimination of a segment, management should look at more than the segments performance report
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true
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when determining product price, what all should be taking into account?
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variable costs, profit margin, and fixed costs
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method of setting prices includes the products total costs plus a desired profit
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total cost method
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when making decisions, managers should consider all relevant costs including
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opportunity costs, out of pocket costs, and incremental costs
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expense amount that would continue if a segment is elminated
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unavoidable expense
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expense that is the amount a company would not incur if a segment is eliminated
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avoidable expense
