When the total amount of the cost will be the same regardless of the alternatives selected in a decision, what should be done about the cost in a decision analysis?
Only those costs and benefits that differ in total between alternatives are
Which of the following would be an advantage of dropping a product line or other segment?
- an overall increase in net operating income -avoiding more fixed costs than the company loses in a contribution margin
A decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier is called a
What involves determining whether to carry out an activity in the value chain internally or use a supplier?
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 contribution margin.
- An overall increase in net operating income.
What costs should be ignored when making decisions?
What cost is a cost that can be eliminated by choosing one alternative over another?
What should be included in the analysis when making a decision?
-
avoidable cost
-relevant cost
-differential costs
- are irrelevant in decisions regarding what to do with the product after split-off.
- cannot be avoided once a process is started.
If, by dropping a product line, a company cannot avoid as much in fixed costs as it loses in contribution margin, the company should
What resource requires a manager to to decided which products or services should be cut back?
Less dependence on suppliers is an advantage of
Deciding what to do with a joint product from the split-o of point forward is
The sell or process further decision
The split-off point is the point in the manufacturing process at which what can be processed as separate products.
When deciding whether to drive your car or to take a train to the destination, the costs for your car insurance and driver's license are
Two or more products that are produced from a common input are known as
How should a bottleneck be managed
- Ensure there is minimal lost time at the bottleneck due to break downs and set-ups.
- Find ways to increase the capacity of the bottleneck
- Focus business process improvement efforts on the bottleneck
What is a one time order that is not considered part of the company's ongoing business?
In order to prevent confusion and keep attention focused on critical information, is desirable to
isolate relevant costs from irrelevant costs
When should a special order be accepted?
When the incremental revenue from the special order exceeds incremental costs of the order
Any final decision to drop or add a business segment is going to hinge primarily on the impact the decision will have on
If some products must be cut back because of a constraint
produce the products with the highest contribution margin per unit of constrained resource
One of the great dangers in allocating common ______ costs is that such allocations can make a product line look less profitable that it really is
What is the best way to make use of a constrained resource?
Increase the capacity of the bottle neck?
Ways to increase a bottleneck
- Investing in additional machines at the bottleneck -Shifting workers from processes that are not bottlenecks to the process that is the bottleneck
When is it profitable to continue processing a joint product after the split-off point?
when the incremental revenue exceeds the incremental processing cost
Managers may choose to retain an unprofitable product line
- it attracts customers - it helps sell other products
What includes activities ranging from development to production to after-sales service.
To maximize total contribution margin when a constrained resource exists
produce the products with the highest contribution margin per unit of the constrained resource
The machine or process that is limiting overall output is called
When a company is involved in more than one activity in the entire value chain it is
When the manager increases the capacity of a bottleneck it is called
Relaxing(elevating) the constraint
are irrelevant in decisions regarding what to do with a product after split off.
- cannot be avoided once a process is started.
Cost that relevant in one decision situation
May not be relevant in another
The cost provided by a well designed activity based costing system are
Potentially relevant to a decision
Direct materials, direct labor payments, and manufacturing overhead costs are all listed in which section of the cash budget?
What budget is an essential management tool that communicates management's plans throughout the organization, allocates resources and coordinates activities?
The first step of the budgeting process is the preparation of the
The ending finished goods inventory budget computes the
What details the raw materials that must be purchased to fulfill the production and to provide for adequate inventories?
Budgeting expenses other than manufacturing are shown on the
selling and administrative budget
What budget shoes all cost of production other than direct materials and direct labor?
Manufacturing overhead budget
The purpose of a budget is to
- coordinate efforts - establish goals - motivate people
Which budget is used as a basis for creating the direct materials budget, direct labor budget, and the manufacturing overhead budget?
What budget shows the number of units that must be produced to satisfy sales needs and to provide for the desired ending inventory?
What is added to the budgeted unit of sales on a production budget to obtain the total number of units to be produced?
Which of the budgets are directly based on number of expected units to be sold from the sales budget?
- Production budget - Purchases budget
The calculation of unit product cost requires information from which of the following budgets?
Manufacturing overhead budget
What shows a company's planned net profit and serves as a benchmark against which subsequent company performance can be measured?
Budgeted income statement
What budget is prepared with the full cooperation of management at all levels?
-Participative - Self imposed
What plan for acquiring and using resource over a specified time period?