ST Decsion Making

Question 1

Avoidable costs

Answer 1

Costs that would not be incurred if the activity to which they relate did not exist

Question 2

Breakeven analysis

Answer 2

Cal to determine the breakeven point

Question 3

Breakeven point

Answer 3

Lvl of sales whereby sales rev is equal to TC

Question 4

Contribution

Answer 4

Sales rev or selling price per unit less variable costs

Question 5

CPV analysis

Answer 5

Cost vol profit analysis of the relationships between activity lvls, costs and profits

Question 6

Incremental costs

Answer 6

The increase in costs that occur asa result of a decision

Question 7

Irrelevant costs

Answer 7

A cost incurred in the past (past sunk cost) that is irrelevant to any decision being made now. It includes committed costs which are future cash flows that will be incurred anyway, regardless of the of the decision being made

Question 8

Limiting factor

Answer 8

A factor of production of sales that limits the amount of a product that can be produced or sold

Question 9

Margin of safety

Answer 9

Excess of budget or actual sales over the breakeven point sales

Question 10

pV ratio

Answer 10

Ratio of contribution to sales, also known as the contribution to sales (C/S) ratio

Question 11

Target profit

Answer 11

A planned lvl of profit, from this the target profit units can be worked out