Ch 12 - Differential Analysis

Question 1

Avoidable cost

Answer 1

A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with relevant cost. (p. 528)

Question 2

Bottleneck

Answer 2

A machine or some other part of a process that limits the total output of the entire system. (p. 544)

Question 3

Constraint

Answer 3

A limitation under which a company must operate, such as limited available machine time or raw materials, that restricts the company?s ability to satisfy demand. (p. 544)

Question 4

Joint costs

Answer 4

Costs that are incurred up to the split-off point in a process that produces joint products. (p. 549)

Question 5

Joint products

Answer 5

Two or more products that are produced from a common input. (p. 549)

Question 6

Make or buy decision

Answer 6

A decision concerning whether an item should be produced internally or purchased from an outside supplier. (p. 539)

Question 7

Relaxing (or elevating) the constraint

Answer 7

An action that increases the amount of a constrained resource. Equivalently, an action that increases the capacity of the bottleneck. (p. 546)

Question 8

Relevant benefit

Answer 8

A benefit that differs between alternatives in a decision. Synonyms are differential benefit and incremental benefit. (p. 528)

Question 9

Relevant cost

Answer 9

A cost that differs between alternatives in a decision. Synonyms are avoidable cost, differential cost, and incremental cost. (p. 528)

Question 10

Sell or process further decision

Answer 10

A decision as to whether a joint product should be sold at the split-off point or sold after further processing. (p. 551)

Question 11

Special order

Answer 11

A one-time order that is not considered part of the company?s normal ongoing business. (p. 542)

Question 12

Split-off point

Answer 12

That point in the manufacturing process where some or all of the joint products can be recognized as individual products. (p. 549)

Question 13

Sunk cost

Answer 13

Any cost that has already been incurred and that cannot be changed by any decision made now or in the future. (p. 528)

Question 14

Vertical integration

Answer 14

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service. (p. 539)