CH 6

Question 1

Avoidable fixed costs

Answer 1

Costs that need not be incurred if an option is not chosen. Same as controllable fixed costs

Question 2

Capacity

Answer 2

The maximum vol of activity that a company can sustain with available resources

Question 3

Excess capacity/excess supply

Answer 3

A condition that obtains when available capacity exceeds realized demand

Question 4

Excess demand

Answer 4

A condition that obtains when realized demand exceeds available capacity

Question 5

Incremental analysis

Answer 5

Same as relevant cost analysis

Question 6

Joint cost

Answer 6

A cost that is common to two or more products. Costs of a joint process.

Question 7

Joint product

Answer 7

Products that are produced in a joint process. It is not possible to produce one joint product without producing the others as well

Question 8

Relevant Cost anaylsis

Answer 8

An approach for framing and solving decisions that involves expressing the benefits and cost of various decision options relative to one of the options

Question 9

Split off point

Answer 9

Step in a joint process after which we can identify and process the joint products separately

Question 10

Totals( gross) approach

Answer 10

An approach that includes non controllable costs and benefits to construct a contribution margin statement for each decision option