Topic 7

Question 1

Relevant costs are expected ______ costs.

Answer 1

future

Question 2

Relevant revenue are expected ______ revenue

Answer 2

future

Question 3

Manager can analyze the data in ______ ways: by considering “all costs and revenues” or considering “ relevant cost and revenues”

Answer 3

two

Question 4

Historical costs themselves are past costs that, therefore, are _________ to decision making.

Answer 4

irrelevant

Question 5

Past costs are also called sunk costs because they are ________ and cannot be changed no matter what action is taken.

Answer 5

unavoidable

Question 6

Managers divide the outcomes of decisions into _____ broad categories: quantitative and qualitative.

Answer 6

two

Question 7

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

Answer 7

numerical terms

Question 8

Qualitative factors are outcomes that are ________ to measure accurately in numerical terms.

Answer 8

difficult

Question 9

Relevant-cost analysis generally emphasizes _____________ factors that can expressed in financial terms.

Answer 9

quantitative

Question 10

Although qualitative factors and quantitative nonfinancial factors are difficult to measure in financial terms, they are _______ for managers to consider.

Answer 10

important

Question 11

RELEVANT COSTS

• Opportunity cost
• Variable cost
• Incremental cost
• __________ cost

Answer 11

Avoidable

Question 12

NON RELEVANT COSTS

• _______ cost
• Commited cost
• Non cash flow ( eg depreciation)
• Fixed overhead absorbed

Answer 12

Sunk

Question 13

A relevant cost has three qualities:

1. Future
2. Cash flow
3. __________

Answer 13

Incremental

Question 14

idle time is ________ cost

Answer 14

irrelevant

Question 15

Incremental cost - the ________ total cost incurred for an activity

Answer 15

additional

Question 16

Differential cost - the difference in total cost between ________ alternatives.

Answer 16

two

Question 17

Incremental Revenue - the additional total revenue from ______ activity

Answer 17

an

Question 18

Differential Revenue - the difference in total revenue between ______ alternatives.

Answer 18

two

Question 19

Opportunity Cost - the benefit ________ through the acceptance of one decision over another

Answer 19

foregone

Question 20

Special Order Pricing: Accept/Reject

Decision rule:

Accept if: ________ revenue > __________ costs

Answer 20

Incremental

incremental

Question 21

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

Answer 21

eliminating

Question 22

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.

Answer 22

financial

Question 23

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.

Answer 23

incremental cost

Question 24

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.

Answer 24

capacity constraints

Question 25

To detrmine product mix, managers maximize ___________ , subject to constraints such as capacity and demand.

Answer 25

operating income

Question 26

Avoidable costs include variable costs and _______ fixed costs

Answer 26

specific

Question 27

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

Answer 27

difference