Short Term Decisions

Question 1

What are the two most common types of short-term decisions ?

Answer 1

1. Break-even analysis
2. Marginal costing

Question 2

Relevant costs can also be known as ?

Answer 2

Avoidable costs

Question 3

Irrelevant costs can also be known as ?

Answer 3

Unavoidable costs

Question 4

Costs that are changed by a decision are ………… ?

Answer 4

Relevant costs

Question 5

Costs that are not affected by a decision are ……….?

Answer 5

Irrelevant costs

Question 6

When looking into decision making, costs that are already spent are reffered to as ?

Answer 6

Sunk costs

Question 7

To help with short term decision making, how are costs classified ?

Function, element, nature, behaviour ?

Answer 7

Behaviour

Question 8

Selling price per unit - variable cost per unit = ????

Answer 8

Contribution per unit

Question 9

Total contribution - total fixed costs = ??????

Answer 9

Profit

Question 10

What is the break-even point within a business ?

Answer 10

The break-even point is where there is no loss but also no profit

Question 11

To work out the break even the information you need is the fixed cost ($) and the contribution per unit ($). What would the equation be to calculate number of units to break even ?

Answer 11

fixed costs ($)/contribution per unit($)

Question 12

To work out the target profit (in units of output) the information you need is the fixed cost ($), target profit ($) and the contribution per unit. What would be the equation for target profit ?

Answer 12

( Fixed costs($) + Target profit($) ) / contribution per unit

Question 13

To work out the profit volume ratio the information needed is the contribution and the selling price. What do be the equation for profit volume ?

Answer 13

Contribution / selling price