Accounting chapter 10

_____ are the costs associated with not choosing the other alternative.

A. sunk costs

B. opportunity costs

C. differential costs

D. avoidable costs

B. Opportunity costs

Which type of incurred costs are not relevant in decision-making (ie they have no bearing on future events) and should be excluded in decision-making?

A. avoidable costs

B. unavoidable costs

C. sunk costs

D. differential costs

C. sunk costs

______ is the act of using another company to provide goods or services that your company requires.

A. allocating

B. outsourcing

C. segmenting

D. leasing

B. Outsourcing

Which of the following is a disadvantage of outsourcing?

A. freeing up capacity

B. freeing up capital

C. transferring production and technology risks

D. limiting ability to upsize or downsize production

D. limiting ability to upsize or downsize production

When operating in a constrained environment, which products should be produced?

A. products with the highest contribution margin per unit

B. products with the highest contribution margin per unit of the constrained process

C. products with the highest selling price

D. products with the lowest allocated joint cost

B. products with the highest contribution margin per unit of the constrained process

What factors must any company consider before accepting a special-order contract?

• the capacity required to fulfill the special order

• the price offered by the buyer will cover the cost of producing the products

• the role of fixed costs in the analysis

• qualitative factors

• whether the order will violate the Robinson-Patman Act and other fair pricing legislation

What are some of the qualitative issues that a special order can create?

• concern for how existing customer will feel if they found out that the company offered a lower price to the special-order customer for the same goods or services

• if the special-order is modified to be cheaper then customers may prefer the modified version for the cheaper price

• company need to make a decision whether selling the new version would hurt the company reputation or profitability

In the decision by a grocery company that is trying to decide whether to keep to drop the bakery department in its grocery stores, what would the bakery manager\`s salary be in relationship to the decision if the manager will be laid off?

the bakery manager’s salary would be avoidable and therefore differential in the analysis.