Chapter 11

Powerful Essays
Topics: Costs, Variable cost
11
Chapter 11
Relevant Costs for Decision Making

Solutions to Questions

11-1 A relevant cost is a cost that differs between alternatives in a decision.

11-2 An incremental cost (or benefit) is the change in cost (or benefit) that will result from some proposed action. An opportunity cost is the benefit that is lost or sacrificed by not taking some course of action. A sunk cost is a cost that has already been incurred, and that cannot be changed by any future decision.

11-3 No. Variable costs are relevant costs only if they differ in total between the alternatives under consideration.

11-4 The original cost of a machine that the company already owns is a sunk cost that cannot differ between any two alternatives pertaining to the future, and hence cannot be a relevant cost.

11-5 No. Not all fixed costs are sunk—only those for which an irrevocable cost outlay has already been made. A variable cost can be a sunk cost, if it has already been incurred.

11-6 No. A variable cost is a cost that varies in total amount in direct proportion to changes in the level of activity. A differential cost is the difference in cost between two alternatives.

11-7 No. Only those future costs that differ between alternatives are relevant costs in decisions.

11-8 Only those costs that can be avoided as a result of dropping the product line are relevant in the decision. Sunk costs and costs that will not differ regardless of whether the line is retained or discontinued are irrelevant.

11-9 No. An apparent product line loss may be the result of allocated common costs or of sunk costs that will continue even if the product line were eliminated. A product line should be discontinued only if the contribution margin that will be lost as a result of dropping the line is less than the fixed costs that can be avoided. Even then there may be arguments in favor of retaining the product line if its presence promotes the sale of other products.

11-10 Allocations of

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Chapter 11

    • 255 Words
    • 2 Pages

    Chapter 11 Mini Case, Q1-4 ONLY, pgs. 353-354 1. Compute the yield to maturity and the after-tax cost of debt for the two bond issues. Bond 1 | | Maturity | 12 | Coupone | 3,5% | Par | 1000 | Flotation | 0 | PV | 1031 | Before tax | 3,19% | After tax cost of Bond | 2,10% | Bond 2 | | Maturity | 32 | Coupone | 4,0% | Par | 1000 | Flotation | 0 | PV | 1035 | Before tax | 3,8% | After tax cost of Bond | 2,5% | 2. Compute BioCom's cost of preferred stock…

    • 255 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    CHAPTER 11

    • 12597 Words
    • 93 Pages

    error of this significance be overlooked by experienced programmers who thoroughly reviewed and tested the new system? 2. 3. Is this an inadvertent error, or could it be a fraud? What-qpn be done to find the error in the program? lntroduction This chapter focuses on auditing an accounting information system (AIS). Audiring is the systematic process of obtaining and evaluating evidence regarding assertions about economic actions and events in order to determine how well they correspond…

    • 12597 Words
    • 93 Pages
    Powerful Essays
  • Satisfactory Essays

    Chapter 11

    • 383 Words
    • 2 Pages

    Chapter 11: Communication *I didn’t write definitions for obvious terms. Communication must include both the transfer and understanding of meaning pg. 336 1. Function of communication 2. Communication process a. Communication Process (1) the sender, (2) encoding, (3) the message, (4) the channel, (5) decoding, (6) the receiver, (7) noise, and (8) feedback. Pg.338 b. Formal Channels are established by the organization and transmit messages related to the professional activities of members…

    • 383 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Chapter 11

    • 851 Words
    • 4 Pages

    Student name: Ihtishaam Ali Date submitted: 3/1/15 Chapter: 11 Chapter Review Questions Questions are at the end of each chapter under the “For Review” heading 1. Consideration is an essential element in the formation of any contract not by deed. To be valid the consideration must be real and genuine 2. Promises to make gifts for charitable or educational purposes are often enforced, despite absence of consideration. 3. No 4. It must be for a reasonable period, not excessive in duration…

    • 851 Words
    • 4 Pages
    Satisfactory Essays
  • Better Essays

    Chapter 11

    • 706 Words
    • 3 Pages

    Kendra Hall 9-11-13 Laurie Willis Chapter 11 DEA Short-Answer Questionss 1. The size and shape of teeth determine their functions because primary teeth are different shape and size of adult teeth, so they do different things, and aren’t able to do as much work as adult teeth. 2. Incisors: Incisors are designed to cut food without using heavy force. The tongue side is shaped like a shovel to guide food into the mouth. Canines: Canines are designed for cutting and tearing foods, which needs…

    • 706 Words
    • 3 Pages
    Better Essays
  • Satisfactory Essays

    Chapter 11

    • 703 Words
    • 3 Pages

    Chapter 11 Section Assessments Section 11.1 7. How do you write a word equation? To write a word equation, write the names of the reactants separated by plus signs followed by an arrow, and followed by the names of the products separated by plus signs. 8. How do you write a skeleton equation? To write a skeleton equation, write the formulas of the reactants to the left of the arrow and the formulas of the products to the right of the arrow. 9. Describe the steps in writing a balanced chemical…

    • 703 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    chapter 11

    • 1673 Words
    • 7 Pages

    Chapter 11 Practice Test Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Why were changes to manufacturing needed in the mid-1700s? a. Factory owners were not satisfied with the size of their profits. b. Demand was greater than the available supply of goods. c. Workers were not satisfied with the level of their daily wages. d. Traders faced higher shipping prices for smaller amounts of goods. ____ 2. Which small, inexpensive…

    • 1673 Words
    • 7 Pages
    Powerful Essays
  • Good Essays

    Chapter 11

    • 1400 Words
    • 6 Pages

    Chapter 11 Mongol armies besieged the Genoese trading on Black Sea in 1346 Damaged trading links between East Asia and Mediterranean bubonic plague Geneose merchants and soldiers withdrew, taking germs with them reached Messina, Sicily, half were dead and rest dying went port to port, spreading the germs killed one third of European population land and sea trailes of human voyagers became accidental conduits for deadly microbes devastated societies more than Mongol warfare “murderous…

    • 1400 Words
    • 6 Pages
    Good Essays
  • Better Essays

    Chapter 11

    • 2231 Words
    • 21 Pages

    Chapter 11 Use the following to answer questions 1-2: Table: Barrels of Oil Barrel of Oil Produced 1 2 3 4 5 6 7 8 9 10 Total Revenue $50 100 150 200 250 300 350 400 450 500 Total Cost $4 10 21 38 61 90 126 176 266 390 Price $50 50 50 50 50 50 50 50 50 50 1. (Table: Barrels of Oil) Refer to the table. How many barrels of oil should the company produce to maximize profit? A) 6 B) 7 C) 8 D) 9 2. (Table: Barrels of Oil) Refer to the table. What is the marginal revenue of producing the fifth barrel…

    • 2231 Words
    • 21 Pages
    Better Essays
  • Good Essays

    Chapter 11

    • 9287 Words
    • 84 Pages

    Principles of Electronics 280 11 Multistage Transistor Amplifiers 11.1 Multistage Transistor Amplifier 11.2 Role of Capacitors in Transistor Amplifiers 11.3 Important Terms 11.4 Properties of dB Gain 11.5 RC Coupled Transistor Amplifier 11.6 Transformer-Coupled Amplifier 11.7 Direct-Coupled Amplifier 11.8 Comparison of Different Types of Coupling 11.9 Difference Between Transistor And Tube Amplifiers INTR ODUCTION INTRODUCTION…

    • 9287 Words
    • 84 Pages
    Good Essays