CHAPTER 19

Question 1

Joint Products

Answer 1

Two or more products that are produced simultaneously from the one production process.

Question 2

Split off Point

Answer 2

Stage of production process where the joint products are identifiable

Question 3

Joint costs

Answer 3

All manufacturing costs incurred in the production of joint products up to the slit off point.

Question 4

Seperable costs

Answer 4

Identified to individual products - incurred after the split of point.

Question 5

By -products

Answer 5

Joint product with very little value when compared to other joint products

Question 6

Relative Sales Value Method

Answer 6

Base allocation in proportion to relative sales value of each product at the split off point

Question 7

Physical Units Method

Answer 7

Base allocation on relative proportions of some physical characteristics e.g. weight of the products at the split off point.

Question 8

Constant Gross Margin Method

Answer 8

Joint costs are allocated to joint products so that the gross margin of the products is identical.

Question 9

The Management Accountants role in Decision Making

Answer 9

• Provide relevant information to managers to assist in decision making.
• Management accountants are often members of cross functional teams.
• Model of the decision making process.

Question 10

Qualitative decision characteristics

Answer 10

the factors relevant to a decision that cannot be expressed effectively in numerical terms.

Question 11

Tactical decisions

Answer 11

decisions that do not require larger increases or decreases in capacity related resources and can be changed quickly.

Question 12

Long term decisions

Answer 12

decisions that tend to be more strategic in nature, and involve large increases or decreases in capacity related resources.

Question 13

Quantitative Information

Answer 13

expressed in numeric terms.

Question 14

Qualitative information

Answer 14

cannot be expressed effectively in numerical terms.

Question 15

Relevant information

Answer 15

information that differs between alternative courses of actions and is future oriented and timely.

Question 16

Timely information

Answer 16

information that is available in time to be used in the decision making process.

Question 17

Importance of providing relevant information

Answer 17

-Generating information is a costly process.
- Supplying irrelevant data to mangers can lead to a waste of managerial resources.
- Information overload decreases the effectiveness of decision making.

Question 18

Unique Decisions

Answer 18

-Arise infrequently or only once.

• relevant info will be often be found inside and outside the organisation.

Question 19

Repetitive decisions

Answer 19

-Made at regular or irregular intervals.
- May draw on a lot of historical data.
- Relevant info should be readily available.

Question 20

Sunk Costs

Answer 20

-Already incurred in the past therefore irrelevant to the decision.

Question 21

Irrelevant future costs and benefits

Answer 21

-do effect future cash flows but do not differ between alternatives
-irrelevant to the decision

Question 22

opportunity Cost

Answer 22

The potential benefit given up when the choice of one action precludes a different action, relevant to the decision

Question 23

Out of Pocket Costs

Answer 23

The incremental costs incurred if a particular course of action is selected, relevant to the decision

Question 24

Avoidable Costs

Answer 24

Costs that will not be incurred in the future if a particular decision is made.

Question 25

Unavoidable costs

Answer 25

Costs that will continue to be incurred no matter which decision alterative is chosen, irrelevant to the decision

Question 26

Accept or Reject a Special Order

Answer 26

• Whether or not to supply a customer with a single, one off order.
• Consider whether spare capacity can be used to meet special order.
  -If spare capacity is not available, meeting the order will require using capacity that is usually used for regular products.

Question 27

Accept or Reject Special Order Considerations:

Answer 27

• Is there a one off decsion or does it have long term potential?
• are there any adverse effects on regular business
  Qualitative Factors?

Question 28

Make or Buy a product

Answer 28

An organisation chooses to produce or purchase the product from a supplier
consider avoidable v unavoidable costs.
opportunity costs are often relevant.

Question 29

Make or Buy a product Considerations:

Answer 29

-Treat fixed costs carefully

-Quality of the purchased product
- Delivery responsiveness, technical capabilities, labour relations and financial stability of the supplier.
-ability of the supplier to respect confidential information