Exam 11: Short-Term Planning Decisions

In the sell-or-process-further decision, the analysis involves subtracting the _______________ ____________ from the relevant revenues under each alternative.

Product D incurred a net loss of $40 000 during the most recent accounting period, calculated as follows: Sales \ 300000 Variable Costs (150000) Fixed Costs (190000) Net Loss An analysis of the fixed costs reveals that $120 000 are avoidable and $70 000 are unavoidable. Profit for the business would increase or decrease by what amount if Product D is discontinued?

Cornell Chemical Limited manufactures a basic chemical compound that is sold for $116 per litre. A new variant of the chemical has been developed, and if the basic compound were processed into the new variant the selling price would be $144 per litre. Cornell expects the market for the new compound variant to be 10 000 litres and determines that processing costs to refine the basic compound into the new variant would be $300 000. Required: (1) Should Cornell produce the new compound variant?

Incremental costs are the costs that a business must incur to perform at a given activity level.

Which of the following is NOT a consideration when deciding to sell a product or process it further?

Opportunity costs are:

Costs and revenues that are not relevant to a decision should be omitted from the analysis, because they are not helpful.

No cost incurred ____________________ to the decision is relevant.

A business that buys parts from other companies may question whether it would be less costly to produce a part than to purchase it from an outside supplier.

What types of business normally make short-term inventory planning decisions?

________________costs are the costs that must be incurred to perform an activity, but that can be avoided if that activity is reduced or discontinued.

Management accounting information helps managers compare the 'profit' from selling the product 'as is' with the 'profit' from using the product as a direct material in the manufacture of another product.

Not including relevant costs and relevant revenues in an analysis results in:

What is a special order? What are elements of the decision?

Which of the following is the first step in decision making?

Which of the following is NOT a consideration when deciding to make or sell a part?

Even if a product turns out to be ____________________ a business' managers may consider dropping it for other reasons, such as the product is hazardous.

Only future costs are ____________________ costs.

A business is considering purchasing a new production machine and will consider the original cost of the existing machine as relevant to its decision making.

Losing regular sales as a result of accepting a special order is an example of avoidable costs.