ACCT 2521 Chapter 10 Learnsmart PDF

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ACCT 2521 Chapter 10 Learnsmart 1. Cost and benefits that always differ b/w alternative are __ cost and benefits: relevant 2. What should be included in the analysis when making a decision?:  Opportunity costs  Relevant costs  Differential costs  Avoidable 3. When making a decision to either go to a movie or rent a DVD, choosing the movie instead of the DVD means that the cost of renting the DVD would be eliminated. This is an example of: relevant cost; avoidable cost 4. Costs that have been incurred and cannot be avoided regardless of what a manager decides to do are __ costs: sunk 5. What should a company consider when making a decision?: relevant costs and benefits 6. Which of the following can make a product line look less profitable than it really is?: allocated common fixed costs 7. A one-time order that is not considered part of the company’s normal ongoing business is referred to as __ decision: special order 8. What are ways to increase the capacity of a bottleneck?:  Shifting workers from processes that are not bottlenecks to the process that is the bottleneck  Investing in additional machines at the bottleneck 9. If, by dropping a product line, a company cannot avoid as much in fixed costs as it loses in CM, the company should: keep the product line 10. Deciding what to do with a joint product at the split off point is a __ or __ __ decision: sell or process further 11. Any final decision to drop or add a business segment is going to hinge primarily on the impact the decision will have met on net __ __: operating income 12. Managers may choose to retain an unprofitable product line because it:  helps sell other products  attracts customers 13. Space being used that would otherwise be idle has a __ cost of zero: opportunity 14. When should a special order be accepted?: when the incremental revenue from the special order exceeds the incremental costs of the order 15. To maximize total CM when a constrained resource exists, produce the products with the: highest CM per unit of the constrained resource 16. When a constraint exists, companies need to focus on maximizing: CM per unit of constraint 17. Two or more products that are produced from a common input are known as __ products: joint 18. The split-off point is the point in the manufacturing process at which the __ products can be recognized as separate products: joint 19. Costs incurred up to the split-off point in a process in which two or more products are produced from a common input are called __ costs: joint

20. It is profitable to continue processing a joint product after the split-off point, so long as the incremental __ from such processing exceeds the incremental processing cost incurred after the split-off point: revenue 21. The potential benefit given up when selecting one alternative over another is a __ cost: opportunity 22. Costs that are relevant in a given decision situation: may not be relevant in another decision situation 23. When planning a trip and deciding to drive your car or take the train, gasoline is a: relevant cost 24. Only rarely will enough info be available to prepare a detailed income statement for both alternatives in a decision. This makes isolating __ costs desirable: relevant 25. Andrews CO. can purchase 20,000 units of Part XYZ from a supplier for $18 per part. Andrews’ per unit manufacturing costs 20,000 units is: Cost Per unit Total Variable man. Cost $12 $240,000 Supervisor salary $3 $60,000 Depreciation $1 $20,000 Allocated fixed overhead $7 $140,000 If the part is purchased, the supervisor position would be eliminated. The special equipment has no other use and no salvage value. Total allocated fixed overhead would be unaffected by the decision. Should the company buy the part or continue to make it?: continue to make-- $60,000 advantage $18 – 12 – 3 = 3 x 20,000 26. 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 __ or __ decision: make; buy 27. Joint costs:  cannot be avoided once a process is started  are irrelevant in decisions regarding what to do with a product after splitoff 28. When a limited resource of some type restricts a company’s ability to satisfy demand, the company has a: constraint 29. Which of the following statements are true?:  joint costs are common costs that are incurred to produce two or more products  improper allocation of joint costs can lead to incorrect decisions  allocation of joint costs is needed for inventory valuation 30. The machine or process that is limiting overall output is called a: bottleneck 31. When deciding whether to fly or take the train on a trip, the cost of putting your pet in a boarding facility while you are away is a __ cost: irrelevant 32. Which of the following are ways in which to calculate the benefit of selecting one alternative over another?:  the difference between the net operating income for the two alternatives  an analysis that looks at all costs and benefits and identifies those that are differential  an analysis that just looks at the relevant costs and benefits

33. Joint costs incurred prior to the split-off point __ relevant in decisions regarding what to do from the split-off point forward: are not 34. What involves increasing the capacity of a bottleneck?: relaxing the constraint 35. When making a product line decision, a company may focus on lost __ __ and avoidable fixed costs or prepare comparative income statements: CM 36. As it applies to sell or process further decisions, which term refers to a product that is in the process of being made?: intermediate product 37. When a company is involved in more than one activity in the entire value chain, it is: vertically integrated 38. Effectively managing an organization’s constraints is a key to increased: profit 39. Joint costs are traditionally allocated among the diff products at the split-off point. A typical approach is to allocate the joint costs according to the relative __ value of the end products: sales 40. Activities ranging from development to production to after-sales service are called a __ __: value chain 41. Abba, Inc. is considering dropping a product line. During the prior year, the line had sales of $207,000 and a CM of $124,000. Fixed expenses consist of: Salaries $60,000 Rent 50,000 Advertising 20,000 Administrative 35,000 Total fixed expenses $165,000 The product line manager’s $60,000 salary is avoidable as is the $20,000 of advertising. Of the administrative expenses, $10,000 is avoidable. The rest are general allocated expenses that will not change if the product is dropped. The rent expense is allocated to product lines based on sales and represents a share of the total cost for the building. If this product line is dropped overall net operating income will: $34,000 $124,000 - $90,000 - $10,000 42. Product ABC has a CM per unit of $10.00. Each unit of ABC requires 5 minutes of machine time. Product XYZ has a CM per unit of $15.00 and each unit requires 10 minutes of machine time. If the company’s constraint is machine hours, to maximize profit, they should first fill the demand for: product ABC 43. Allocating joint costs to products at the split-off point is misleading for decision making about the products: true...