Chapter 8 Flashcards
When making decisions, managers should consider
revenues that differ between alternatives
In making short-term special decisions, the decision-maker should
separate variable cost from fixed costs.
Which of the following costs is irrelevant to business decisions?
Sunk Costs
When pricing a product, managers must consider which of the following costs?
All type of costs
Which of the following costs is relevant to Paper Mart’s decision to accept a special order at a lower sale price from a large customer?
The cost of shipping the order to the customer
Kent Embroidery Company has received a special sales order from Mahoney County for a large order. The incremental fixed costs that will be be incurred to create a new pattern that can only be used for this order are
relevant to the decision to accept the special order
When deciding whether to drop its CD label line, Avery Products Corporation would consider
all of the listed items should be considered
Common fixed costs that are allocated among departments are generally
Irrelevant to the decision of whether to discontinue the department
To maximize its total contribution margin when it has a limited supply of the mineral nickel, Telsa, Inc., should focus on producing the car model that has the highest
contribution margin per pound of nickel
When making outsourcing decisions
the variable cost producing the product in-house is relevant
When deciding whether to sell banana powder as is or to process further to make banana bread mix, managers should ignore which of the following?
The costs of processing the banana powder thus far
Special Order Considerations
Do we have excess capacity to fill this order?
Will the reduced sales price be high enough to cover the incremental costs of filling the order
will the special order affect regular sales in the long run?
Outsourcing considerations
How do our variable cost per unit compare to the outsourcing cost per unit?
Are any fixed costs a avoidable if we outsource?
what could we do with the freed capacity if we outsource?
What volume do we need?
Sell as is or Process Further Considerations
How much revenue will we receive if we sell the product as is?
How much revenue will we receive if we sell the product after processing it further?
How much extra will it cost to process the product further?
