chapter 11 part 1

Question 1

When making a product line decision, a company may focus on lost contribution margin and avoidable fixed costs or prepare comparative ______ __________

showing the effects of either keeping or dropping the product line.

Answer 1

income statement

Question 2

Being less dependent on suppliers and realizing profits from the parts and materials that it is “making” rather than “buying,” as well as profits from its regular operations, are advantages of

Answer 2

vertical integration

Question 3

when a company is involved in more than one activity in the entire value chain

Answer 3

vertically integrated

Question 4

Being less dependent on suppliers and realizing profits from the parts and materials that it is “making” rather than “buying,” as well as profits from its regular operations, are advantages of __________ ____________.

Answer 4

vertical integration

Question 5

cost that differs between alternatives

Answer 5

relevant cost

Question 6

a decision to carry out one of the activities in the value chain internally rather than to buy externally from a supplier

Answer 6

make or buy

Question 7

Irrelevant costs include _________.

Answer 7

sunk costs

future costs that do not differ between alternatives

Question 8

Less dependence on suppliers is an advantage of ______.

Answer 8

vertical integration

Question 9

Isolating relevant costs is desirable because Blank______.

Answer 9

critical information may be overlooked with the total cost approach

irrelevant costs may be used incorrectly in the analysis

all information needed for the total cost approach is rarely available