Management Accounting Ch07
Quizzes and Glossary
Quizzes and Glossary
Set of flashcards Details
| Flashcards | 21 |
|---|---|
| Language | English |
| Category | Finance |
| Level | University |
| Created / Updated | 02.06.2021 / 03.02.2023 |
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Determining and evaluating possible courses of action is a step in management’s decision-making process.
In incremental analysis fixed costs may not change under alternative courses of action, while variable costs may change.
The relevant data to consider in accepting an order at a special price are the additional manufacturing costs incurred and expected revenues.
The basic decision rule to sell or process further is: process further as long as the incremental revenue from such processing exceeds the incremental processing costs.
Book value is a sunk cost and is therefore relevant in incremental analysis of retain or replace equipment.
Fixed manufacturing costs will never be relevant in a make or buy decision.
Opportunity costs are costs that have already been incurred and will not be avoided by any future decision.
In deciding on the future status of an unprofitable segment, management should consider the effect of elimination on the remaining product lines.
Joint product costs are relevant for any sell-or-process further decisions.
Any trade-in allowance or cash disposal value of the old asset is relevant in a retain or replace equipment decision.
Which of the following is not a step in management’s decision-making process?
If revenues are $315,000 under alternative A and $324,000 under alternative B, and costs are $285,000 for A and $306,000 for B, then using the basic approach in incremental analysis, incremental revenues, costs, and net income, in comparing B to A are respectively
The cost to manufacture an unfinished unit is $120 ($90 variable, $30 fixed). The selling price per unit is $150. The company has unused productive capacity and has determined that units could be finished and sold for $195 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit?
The potential benefit that may be obtained from following an alternative course of action is called
In a make or buy decision, the relevant costs include each of the following except the
Incremental analysis
The process of identifying the financial data that change under alternative courses of action.
Joint costs
For joint products, all costs incurred prior to the point at which the two products are separately identifiable (known as the split-off point).
Joint products
Multiple end-products produced from a single raw material and a common production process.
Opportunity cost
The potential benefit that is lost when one course of action is chosen rather than an alternative course of action.
Relevant costs
Those costs and revenues that differ across alternatives.
Sunk cost
A cost that cannot be changed or avoided by any present or future decision.
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