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13 Cards in this Set
- Front
- Back
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What are product costs?
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Costs incurred on factory floor that are initially inventory.
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What are period costs?
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Cost that you expense in the current period; when it is incurred.
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What is the difference between variable and absorption costing?
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Variable counts Fixed MOH as a period cost, while absorption counts Fixed MOH as a product cost.
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What are the two different methods of computing income?
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Variable costing and absorption costing.
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What is the relationship between VNI vs. ANI when building inventory?
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Variable NI < Absorption NI
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What is the relationship between VNI vs. ANI when depleting inventory?
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Variable NI > Absorption NI
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When there is no change in inventory...
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Variable NI = Absorption NI
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What is a relevant cost?
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Must be future oriented and must differ between alternatives
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What is an irrelevant cost?
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Either not future oriented or doesn't differ between alternatives.
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What are sunk costs?
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Costs from the past; shouldn't affect future decisions.
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What are the three steps of a decision making model?
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1. Identify the decision to be made
2. Identify the alternatives and their costs and benefits 3. Make the decision |
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What are the four steps of identifying alternatives and their costs and benefits?
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1. Calculate the differential cost (relevant vs. irrelevant)
2. Consider opportunity costs 3. Ignore sunk costs 4. Identify qualitative factors |
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What are the five relevant cost decisions?
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1. Make-or-Buy
2. Special Orders 3. Keep or Drop 4. Process Further or Sell 5. Product Mix Decisions |
