ACTG 2020 Study Guide - Glacier Peak, Cost Driver, Purchasing Manager

77 views6 pages

redjackal592

2 Mar 2014

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

The difference in total cost between two alternatives. The foregone contribution margin by choosing a different alternative. This is not recording in the company"s financial ledgers. All costs incurred in the past that cannot be changed by any decision made now or in the. Sunk costs should not be considered in decisions and are therefore, irrelevant. The decision to accept additional business should be based on incremental costs and incremental revenues. are those that occur if the company decides to accept the: incremental amounts new business, sunk costs are not considered for these decisions. When a company is involved in more than one activity in the entire value chain, it is vertically integrated. A decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier is called a. Costs incurred in manufacturing units of product that do not meet quality standards are sunk costs and cannot be recovered.

Related Questions

1. Which of the following costs is not relevant in aspecial-order decision?
A. Direct labor
B. Direct materials
C. Variable overhead
D. Fixed overhead

2. Costs that change across decision alternatives are
A. accounting costs.
B. activity-based costs.
C. incremental costs.
D. capital costs.

4. The potential benefit of one alternative that is lost bychoosing another is known as a(n):
A. Sunk cost
B. Out-of-pocket cost
C. Differential cost
D. Opportunity cost

5. A cost that cannot be avoided or changed because it arisesfrom a past decision, and is irrelevant to future decisions, iscalled a(n):
A. Uncontrollable cost
B. Incremental cost
C. Opportunity cost
D. Sunk cost

6. An additional cost that is incurred only if a particularaction is taken is a(n):
A. Period cost
B. Pocket cost
C. Discount cost
D. Incremental cost

7. The payback period:
a. Is the length of time necessary to recover the entire cost of aninvestment from its resulting annual net cash flow.
b. Is the length of time necessary to recover the entire cost of aninvestment from its resulting annual net income.
c. Takes into consideration the profitability of an investment overits entire life, but ignores the timing of its future cashflows.
d. Takes into consideration both the profitability of an investmentover its entire life and the timing of its future cash flows.

emeralddeer628

Tactical decision making

Tactical decision making means choosing among alternatives withan immediate or limited end in view. For example, a company mayaccept a special order for less than the normal selling price touse idle capacity. Tactical decisions tend to be short-runin nature; however, it should be emphasized that short-rundecisions often have long-run consequences. A general tacticaldecision-making model is outlined here.

1.	Recognize and define theproblem.
2.	Identify possible alternativesolutions to the problem, and eliminate any unfeasiblealternatives.
3.	Identify the costs and benefitsassociated with each feasible alternative. Eliminate the costs andbenefits that are not relevant to the decision.
4.	Compare the relevant costsand benefits for each alternative.
5.	Assess qualitative factors.
6.	Select the alternative with thegreatest overall benefit.

Identifying and comparing relevant costs and revenues is theheart of the tactical decision model. Relevant costs (revenues) arefuture costs (revenues) that differ across alternatives. (Revenuesare treated in the same way as costs, so we will simplify thediscussion by referring to costs.) All decisions relate to thefuture; so, only future costs can be relevant. In addition, thecost must differ from one alternative to another. If a future costis the same for more than one alternative, it has no effect on thedecision. Such a cost is an irrelevant cost.

Assume that Reeves Company is considering accepting a specialorder for $25 per unit when the normal selling price is $30 perunit. Reeves has enough excess capacity to make the order withoutdisplacing normal sales. The alternatives facing Reeves Company are(Select "Yes" for the statements that are applicable and "No" forthe items that do not apply):

Accept the special order.	- Select your answer -YesNoItem1
Reject the special order.	- Select your answer -YesNoItem2
Sell normal sales for $25 perunit.	- Select your answer -YesNoItem3

Choose which of the following are relevant in deciding whetheror not to accept the special order. (Select "Yes" for thestatements that are applicable and "No" for the items that do notapply)

$25 price.	- Select your answer -YesNoItem4
$30 normal price.	- Select your answer -YesNoItem5
Variable cost of making the unitsin the special order.	- Select your answer -YesNoItem6
Depreciation on factory equipmentused in making the special order units.	- Select your answer -YesNoItem7
Increased property taxes on thefactory building which are due while the special order would bemade.	- Select your answer -YesNoItem8

While cost and revenue information is important, otherinformation may be needed to make an informed decision. Thesenon-financial factors are termed qualitative and are often relevantin decision making. For example, in deciding whether to make acomponent in-house or purchase it from an outside supplier, thecompany may consider any difference in quality or in responsivenessto the company's production schedules.

goldmoose557

Question 1 10 pts A segment of a business probably should bediscontinued if its contribution margin exceeds its controllablefixed costs and its common costs. it cannot produce a contributionmargin. its common costs exceed its contribution margin. it has anet loss. Flag this Question Question 2 10 pts Contribution marginis calculated by deducting fixed costs from revenue. deductingvariable costs and controllable fixed costs from revenue. deductingvariable costs and common costs from revenue. deducting variablecosts from revenue. Flag this Question Question 3 10 pts Which ofthe following is the first step in the decision-making process?Identify workable alternatives Define the problem Considerappropriate nonfinancial factors Evaluate the cost and revenue dataFlag this Question Question 4 10 pts Fixed manufacturing costs arewritten off as current expenses of the period in which theyoccurred when using direct costing. standard costing. absorptioncosting. differential costing. Flag this Question Question 5 10 ptsDirect costing differs from absorption costing in that underabsorption costing all fixed manufacturing overhead is expensed inthe current period. under direct costing all fixed overhead isexpensed in the current period. under absorption costing anincrease in finished goods inventory does not affect the amount offixed costs expensed. under direct costing a portion of the fixedmanufacturing overhead is included in the finished goods inventory.Flag this Question Question 6 10 pts Which is the final step in thedecision-making process? Evaluate the cost and revenue dataIdentify workable alternatives Consider appropriate nonfinancialfactors Make a decision Flag this Question Question 7 10 pts Whichof the following is NOT a consideration when determining whether tocontinue making a part or to buy that part? the opportunity costthe timing of the cash receipts and expenditures the impact onemployees the sunk cost Flag this Question Question 8 10 pts Coststhat are not directly traceable to a segment of a business arecalled sunk costs. common costs. fixed costs. incremental costs.Flag this Question Question 9 10 pts Which of the following shouldNOT be a consideration when deciding whether to make or buy a part?impact on continued supply of the part impact on quality of thepart under each set of circumstances impact on sales to existingcustomers impact on factory employee morale Flag this QuestionQuestion 10 10 pts In making a decision to replace a machine, whichof the following is not relevant? the variable costs of operatingthe old machine the training that workers will need in order to usethe new machine the book value of the old machine the variablecosts of operating the new machine

lilacraccoon844

ACTG 2020 Study Guide - Glacier Peak, Cost Driver, Purchasing Manager

Document Summary

Get access

Related Documents

ACTG 2020 Chapter Notes - Chapter 13: Convenience Store, Accept (Organization), Financial Statement

ACTG 2020 Chapter Notes - Chapter 12: Total Quality Management, Opportunity Cost, Sunk Costs

ACTG 2020 Chapter Notes - Chapter 12: Sunk Costs, Management Accounting, Fixed Cost

Related Questions