Sunk Cost-cost that has already been incurred and cannot be avoided no matter what a manager decides to do. A business segment should only be dropped if a company can avoid more in fixed costs than it loses in: contribution margin Which of the following techniques describe how a bottleneck should be managed: Find ways to increase the capacity of the bottleneck, ensure there is minimal lost time at the bottleneck due to breakdowns and set-ups, focus business process improvement efforts on the bottleneck. When identifying costs that are differential, a manager would eliminate costs and benefits that do not differ between alternatives and use the remaining costs and benefits that do differ between alternatives in making the decision. The costs that remain are differential or relevant costs. Which of the following refers to the costs that ALWAYS differ between alternatives? Relevant Costs, irrelevant costs do not impact decisions. What to do with a joint products from the split off point forward is known as the “sell or process further” decision. When should a special order be accepted? When the incremental revenue from the special order exceeds the incremental costs of the order. A decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier, is “make or buy” decision. To maximize the total contribution margin when constrained resources are an issue, what should a company try to do? Produce the products with the highest contribution margin per unit of constrained resource. When trying to decide if a particular cost is avoidable, how does a manager categorize irrelevant costs? Sunk costs, and future costs that do not differ between alternatives. Which of the following is the BEST way to make use of a constrained resource? Increase the capacity of the bottleneck. Costs that differ between alternatives are called relevant costs. Irrelevant costs can be ignored.
The costs incurred up to the split-off point...
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