ACC 241 Exam 3 ASU Dallmus
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relevant costs - ANSWER - Relevant costs are costs that differ between
alternatives.When making the decision, the company should consider relevant
costs.
Relevant costs are also called differential costs, incremental costs, or avoidable
costs.
Analyzing special orders - ANSWER - -Whether excess capacity exists
-Whether the special order will affect regular sales in the long run
-Whether the special price will be high enough to cover incremental costs of filling
the order
product pricing - ANSWER - When an item first comes on the market it is generally
higher than when it's been on the market for a while
(cost plus, target costing)
How to analyze dropping a product line decision? - ANSWER - A company should
drop the product line only if avoidable cost savings are greater than the contribution
margin lost.
Make versus Buy decisions - ANSWER - Decisions involve deciding whether to
perform a particular function in-house versus buying it from and outside supplier
- If the incremental costs of making exceed the incremental costs of buying, then
the company should buy it.
Sell as is or process further decisions - ANSWER - For sell as is or process further
decisions, if the incremental revenue from processing further exceeds the
incremental cost of processing further, then the correct decision is to process
further.
, Sales Volume Variance - ANSWER - the difference between the flexible budget and
the master budget
Flexible Budget Variance - ANSWER - difference between flexible budget and actual
results
Decentralization - ANSWER - When the company splits their operations into different
operating segments.
master budget - ANSWER - A comprehensive financial plan consisting of various
individual budgets; done at the beginning of a period
Benefits of Budgeting - ANSWER - 1. Forces managers to plan
2. Facilitates coordination and communication within the business
3. Helps motivate personnel throughout organization to meet planned objectives
4. Provides a standard for performance evaluation
Types of responsibility centers - ANSWER - cost center, revenue center, profit center,
investment center
cost center - ANSWER - a business segment whose manager has control over cost
but has no control over revenue or investments in operating assets
revenue center - ANSWER - a responsibility center in which managers are
responsible for generating revenue
profit center - ANSWER - separate company unit responsible for its own costs and
profits
investment center - ANSWER - a division that generates revenues, incurs costs, and
controls the investment of available funds.
-managers are evaluated on profitability of divisions and efficient use of assets.
Ex: subsidiary companies, Stand-alone divisions of a company
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