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13 Cards in this Set

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Word of Advice
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.
What are relevant costs and benefits, in general?
Costs and benefits that must be identified in making certain production decisions.
What are relevant costs and benefits more specifically?
All future COSTS and BENEFITS that DIFFER among alternatives.
What is another name for relevant costs and benefits?
Relevant Factors
What are the four categories of production decisions that focus on identifying relevant costs?
Please Keep My Angels

Process Further or Sell Now
Keep or Drop
Make or Buy
Accept or Reject
What are the two types of relevant factors?
Avoidable Costs (costs)
Opportunity Costs (benefits)
What are avoidable costs?
Costs that can be eliminated by choosing one alternative over another.
What are opportunity costs?
Benefits forgone when the selection of one course of action prevents another course of action.
What are the two general categories of unavoidable or irrelevant costs?
Sunk Costs
Future costs and benefits that DO NOT DIFFER among alternatives
What are sunk costs?
Costs that have already occurred and cannot be changed.
Give examples of the unavoidable future costs and benefits that will not differ among alternatives.
Fixed or allocated costs
When making decisions to process further or sell now, what type of products does this usually involve?
Joint products, but not always
What are two important things to note about the joint product environment?
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.