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Flashcards in exam 6 Deck (16)
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1

consists of choosing among alternatives with an immediate or limited end in view. also referred to as tactical decisions

Short run decision making

2

a specific set of procedures that produces a decision, can be used to structure the decision maker’s thinking and to organize the information

decision making model

3

Step 1. Recognize and define the problem.
 Step 2. Identify alternatives as possible solutions to the problem. Eliminate
alternatives that clearly are not feasible.
 Step 3. Identify the costs and benefits associated with each feasible alternative. Classify costs and benefits as relevant or irrelevant, and eliminate irrelevant ones from consideration.
 Step 4. Estimate the relevant costs and benefits for each feasible alternative.
 Step 5. Assess qualitative factors.
 Step 6. Make the decision by selecting the alternative with the greatest overall net benefit.

Steps of the decision making model

4

possess two characteristics:  they are future costs AND
 they differ across alternatives

relevant costs

5

is the benefit sacrificed or foregone when one alternative is chosen over another.

opportunity costs

6

cost that cannot be affected by any future action.

sunk cost

7

decisions involving a choice between internal and external production.

make-or-buy decision

8

focus on whether a specially priced order should be accepted or rejected.
These orders often can be attractive, especially when the firm is operating below its maximum productive capacity.

special-order decisions

9

have common processes and costs of production up to a split-off point. At that point, they become distinguishable as separately identifiable products.

joint products

10

The point of separation

split off point

11

efers to the relative amount of each product manufactured (or service provided) by a company.

product mix decisions

12

Every firm faces limited resources and limited demand for each product

constraints

13

a percentage applied to the base cost.
Companies that bid for jobs routinely base bid price on cost.

Markup

14

a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay

Target costing

15

nclude the process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets.

capital investment decisions

16

The process of making capital investment decisions often is referred to as

capital budeting