the decisions rule for segment elimination is to consider eliminating a segment if the segment revenues are less than the segment ________ expenses
revenue from selling as is, incremental costs of processing further, and revenue from selling after further processing
when making sell or process decisions, management should consider what?
(DM + DL) x number of additional units= incremental costs to fill order
EX: company gets an order of 10,000 units of product, standard costs of producing one unit is DM $4, DL $3 and Fixed OH $2. If order is accepted, total incremental costs to fill the order are?
(4+3) x 10,000=$70,000. Fixed costs don’t change so they are irrelevant
incremental costs to fill an order
the highest contribution margin
when demand is unlimited and products use the same inputs, the company should produce the product with what?
revenue from selling defective units as scrap, lost profit on making and selling new units while reworking defective units, and incremental costs
when making scrap or rework decisions, management should consider what?
incremental revenues, incremental costs, existing sales, and available capacity
when making additional business decisions, management should consider what?
define task and goal, identify alternative actions, collect relevant information, select course of action, and analyze and assess decison
steps of decision making process in order
cost that arises from a past decision, cannot be avoided or changed, and is irrelevant to future decisions
available capacity, product quality, employee morale, and incremental costs
in a make or buy decision, management should consider what?
highest contribution margin per unit of scarce resources
when production facilities are limited, the company should produce the mix that will not exceed demand and maximize the production of the product with the:
costs aka differential costs, that are additional costs incurred if a company pursues a certain course of action
trade-in allowance on the old equipment, operating cost of old equipment, and operating cost of new equipment
when making keep or replace equipment decisions, management should consider what?
additional or incremental revenues generated by selecting a particular course of action over another
potential benefit lost by taking a specific action when two or more alternative choices are available
T/F when considering elimination of a segment, management should look at more than the segments performance report
variable costs, profit margin, and fixed costs
when determining product price, what all should be taking into account?
total cost method
method of setting prices includes the products total costs plus a desired profit
opportunity costs, out of pocket costs, and incremental costs
when making decisions, managers should consider all relevant costs including
expense amount that would continue if a segment is elminated
expense that is the amount a company would not incur if a segment is eliminated
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