ACCT 202 Exam 4

what is a future cost that differs between two alternatives

differential cost

future revenue that differs between two alternatives

differential revenue

are differential costs and revenues relevant or irrelevant

relevant

what is an increase in cost between two alternatives

incremental cost

what cost can be eliminated by choosing one alternative

avoidable cost

what are two relevant costs that fall under differential costs

incremental and avoidable

are sunk costs relevant or irrelevant

irrelevant

what costs have no impact on future cash flows and remain the same no matter what alternatives are being considered

sunk costs

should future costs and benefits be considered in the decision-making process

irrelevant

what are all the activities, from development, to production, to after-sales service are called a

value chain

when a company is involved in more than one activity in the entire value chain

vertically integrated

decision to carry out one of the activities in the value chain internally

sourcing decision

a one-time order that is not a part of the company’s normal ongoing business

special order

companies have to trade-off or sacrifice production of some products in favor of others in an effort to maximize profits

volume trade-off decisions

anything preventing you from getting more of what you want (weakest link)

constraint

what costs remain the same regardless of how constrained a resource is used

fixed

what is favored when looking at constraints

products with the highest contribution margin per unit of the constrained resource

increase profits by increasing the capacity of the bottleneck (demand exceeds capacity)

relaxing/elevating the constraint

two or more products are produced from a single raw material input

joint product costs

the point in a manufacturing process where joint products can be recognized as aseperate products

split-off point

deciding to sell a joint product at slit-off point or process it further

sell or process further decision

in the sell/process further decision, what costs are ignored up until the split- off point

joint costs

what is calculated in the process of deciding to sell/process further the decision

incremental revenue earned by further processing the joint product

what is the formula for step 3 in the sell or process further decision

incremental revenue before split-off point minus (-) incremental costs associated with processing the joint product beyond the split-off point