CHAPTER 19 Flashcards

1
Q

Joint Products

A

Two or more products that are produced simultaneously from the one production process.

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2
Q

Split off Point

A

Stage of production process where the joint products are identifiable

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3
Q

Joint costs

A

All manufacturing costs incurred in the production of joint products up to the slit off point.

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4
Q

Seperable costs

A

Identified to individual products - incurred after the split of point.

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5
Q

By -products

A

Joint product with very little value when compared to other joint products

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6
Q

Relative Sales Value Method

A

Base allocation in proportion to relative sales value of each product at the split off point

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7
Q

Physical Units Method

A

Base allocation on relative proportions of some physical characteristics e.g. weight of the products at the split off point.

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8
Q

Constant Gross Margin Method

A

Joint costs are allocated to joint products so that the gross margin of the products is identical.

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9
Q

The Management Accountants role in Decision Making

A
  • Provide relevant information to managers to assist in decision making.
  • Management accountants are often members of cross functional teams.
  • Model of the decision making process.
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10
Q

Qualitative decision characteristics

A

the factors relevant to a decision that cannot be expressed effectively in numerical terms.

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11
Q

Tactical decisions

A

decisions that do not require larger increases or decreases in capacity related resources and can be changed quickly.

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12
Q

Long term decisions

A

decisions that tend to be more strategic in nature, and involve large increases or decreases in capacity related resources.

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13
Q

Quantitative Information

A

expressed in numeric terms.

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14
Q

Qualitative information

A

cannot be expressed effectively in numerical terms.

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15
Q

Relevant information

A

information that differs between alternative courses of actions and is future oriented and timely.

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16
Q

Timely information

A

information that is available in time to be used in the decision making process.

17
Q

Importance of providing relevant information

A

-Generating information is a costly process.
- Supplying irrelevant data to mangers can lead to a waste of managerial resources.
- Information overload decreases the effectiveness of decision making.

18
Q

Unique Decisions

A

-Arise infrequently or only once.

  • relevant info will be often be found inside and outside the organisation.
19
Q

Repetitive decisions

A

-Made at regular or irregular intervals.
- May draw on a lot of historical data.
- Relevant info should be readily available.

20
Q

Sunk Costs

A

-Already incurred in the past therefore irrelevant to the decision.

21
Q

Irrelevant future costs and benefits

A

-do effect future cash flows but do not differ between alternatives
-irrelevant to the decision

22
Q

opportunity Cost

A

The potential benefit given up when the choice of one action precludes a different action, relevant to the decision

23
Q

Out of Pocket Costs

A

The incremental costs incurred if a particular course of action is selected, relevant to the decision

24
Q

Avoidable Costs

A

Costs that will not be incurred in the future if a particular decision is made.

25
Q

Unavoidable costs

A

Costs that will continue to be incurred no matter which decision alterative is chosen, irrelevant to the decision

26
Q

Accept or Reject a Special Order

A
  • Whether or not to supply a customer with a single, one off order.
  • Consider whether spare capacity can be used to meet special order.
    -If spare capacity is not available, meeting the order will require using capacity that is usually used for regular products.
27
Q

Accept or Reject Special Order Considerations:

A
  • Is there a one off decsion or does it have long term potential?
  • are there any adverse effects on regular business
    Qualitative Factors?
28
Q

Make or Buy a product

A

An organisation chooses to produce or purchase the product from a supplier
consider avoidable v unavoidable costs.
opportunity costs are often relevant.

29
Q

Make or Buy a product Considerations:

A

-Treat fixed costs carefully

-Quality of the purchased product
- Delivery responsiveness, technical capabilities, labour relations and financial stability of the supplier.
-ability of the supplier to respect confidential information