ACCT 212 HW 7 CH 10 – Flashcards

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question
the decisions rule for segment elimination is to consider eliminating a segment if the segment revenues are less than the segment ________ expenses
answer
avoidable
question
when making sell or process decisions, management should consider what?
answer
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
question
when demand is unlimited and products use the same inputs, the company should produce the product with what?
answer
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
question
expense that is the amount a company would not incur if a segment is eliminated
answer
avoidable expense
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