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13 Cards in this Set
- Front
- Back
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Word of Advice
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Decisions involving relevant costs are tested lightly on the exam - usually a single question about one of the four types of decisions per exam. This is, however, one of the few areas in Planning & Measurement for which questions tend to be computational rather than conceptual.
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What are relevant costs and benefits, in general?
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Costs and benefits that must be identified in making certain production decisions.
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What are relevant costs and benefits more specifically?
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All future COSTS and BENEFITS that DIFFER among alternatives.
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What is another name for relevant costs and benefits?
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Relevant Factors
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What are the four categories of production decisions that focus on identifying relevant costs?
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Please Keep My Angels
Process Further or Sell Now Keep or Drop Make or Buy Accept or Reject |
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What are the two types of relevant factors?
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Avoidable Costs (costs)
Opportunity Costs (benefits) |
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What are avoidable costs?
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Costs that can be eliminated by choosing one alternative over another.
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What are opportunity costs?
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Benefits forgone when the selection of one course of action prevents another course of action.
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What are the two general categories of unavoidable or irrelevant costs?
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Sunk Costs
Future costs and benefits that DO NOT DIFFER among alternatives |
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What are sunk costs?
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Costs that have already occurred and cannot be changed.
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Give examples of the unavoidable future costs and benefits that will not differ among alternatives.
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Fixed or allocated costs
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When making decisions to process further or sell now, what type of products does this usually involve?
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Joint products, but not always
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What are two important things to note about the joint product environment?
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1. Products are not separately identifiable until after the split-off point.
2. The costs incurred up to the split-off point cannot be separated or avoided. |
