Topic 7 Flashcards
Relevant costs are expected ______ costs.
future
Relevant revenue are expected ______ revenue
future
Manager can analyze the data in ______ ways: by considering “all costs and revenues” or considering “ relevant cost and revenues”
two
Historical costs themselves are past costs that, therefore, are _________ to decision making.
irrelevant
Past costs are also called sunk costs because they are ________ and cannot be changed no matter what action is taken.
unavoidable
Managers divide the outcomes of decisions into _____ broad categories: quantitative and qualitative.
two
Quantitative factors are outcomes that are measured in ___________.
Some quantitative factors are financial; they can be expressed in monetary terms. Other quantitative factors are nonfinancial; they can be measured numerically, but they are not expressed in monetary terms
numerical terms
Qualitative factors are outcomes that are ________ to measure accurately in numerical terms.
difficult
Relevant-cost analysis generally emphasizes _____________ factors that can expressed in financial terms.
quantitative
Although qualitative factors and quantitative nonfinancial factors are difficult to measure in financial terms, they are _______ for managers to consider.
important
RELEVANT COSTS
- Opportunity cost
- Variable cost
- Incremental cost
- __________ cost
Avoidable
NON RELEVANT COSTS
- _______ cost
- Commited cost
- Non cash flow ( eg depreciation)
- Fixed overhead absorbed
Sunk
A relevant cost has three qualities:
- Future
- Cash flow
- __________
Incremental
idle time is ________ cost
irrelevant
Incremental cost - the ________ total cost incurred for an activity
additional
Differential cost - the difference in total cost between ________ alternatives.
two
Incremental Revenue - the additional total revenue from ______ activity
an
Differential Revenue - the difference in total revenue between ______ alternatives.
two
Opportunity Cost - the benefit ________ through the acceptance of one decision over another
foregone
Special Order Pricing: Accept/Reject
Decision rule:
Accept if: ________ revenue > __________ costs
Incremental
incremental
Outsourcing => Make or Buy Decision
Decision Rule:
In deciding whether to accept the outside supplier’s offer, we need to isolate the part by ___________:
- The sunk costs
- The future costs that will not differ between making or buying the parts
eliminating
Opportunity costs are not recorded in _______ accounting system. Because historical record keeping is limited to transactions involving alternatives that managers actually selected rather than alternatives that they rejected.
financial
The relevant cost of any alternative is (1) the ____________ of the alternative plus (2) the opportunity cost of the profit forgone from choosing that alternative.
incremental cost
Product-mix decision: decision managers make about which products to sell and in what quantities. The decisions usually have only a short-run focus because they typically arise in the context of ___________ that can be relaxed in the long run.
capacity constraints
To detrmine product mix, managers maximize ___________ , subject to constraints such as capacity and demand.
operating income
Avoidable costs include variable costs and _______ fixed costs
specific
Margin of safety: the ________ between the budgeted and the breakeven level of activity. It may be stated: in units or as a percentage to budgeted units
difference
