ACC-1B Lecture Notes - Lecture 6: Sunk Costs, Net Income, Cost Accounting
Document Summary
Repair, retain, or replace equipment = book value of old machine does not affect the decision. Costs which cannot be changed by future decision (sunk cost) are not relevant in incremental analysis. However, any trade in allowance or cash disposal value of the existing asset is relevant. Fixed costs allocated to the unprofitable segment must be absorbed by the other segments. Net income may decrease when an unprofitable segment is eliminated. Decision rule: retain the segment unless fixed costs eliminated exceed contribution margin lost. Variance analysis and nonfinancial performance measures 11 questions on the assessment. Oh controllable variance difference between actual oh incurred and oh budgeted for standard hours allowed. Standard hours allowed the hours that should have been worked for the unites produced. Materials price variance difference between the actual qty times the actual price and the actual qty times the standard price. Variances difference between total actual costs and total standard costs.
