EXAM 2 - CH 11

Question 1

Relevant costs and revenues

Answer 1

expected future costs and revenues that DIFFER among multiple decisions that could be made

Question 2

what framework is used for decision making?

Answer 2

CVP

Question 3

What factors does the CVP format dot incorporate

Answer 3

qualitative factors like morale, upset customers

Question 4

Irrelevant costs are not relevant because they…

Answer 4

occurred in the past or do not differ among choices

Question 5

what are the potential mistakes with relevent costing

Answer 5

1. Assuming all variable costs must be relevant
2. Assuming that all fixed costs are irrelevant

Question 6

What is the rule of thumb for make or buy situations?

Answer 6

if outsourcers selling price is less than our VC go for it but be away or quality, capacity, and contractual issues.

Question 7

what issue goes away in make or buy situations

Answer 7

machine capacity

Question 8

Drop/Keep Customer Rule of Thumb

Answer 8

if the customer is a Negative CM drop

for retailers CM and GM are almost the same so if GM is negative then drop