Chapter 12 Differential Analysis Flashcards Preview

Accounting II > Chapter 12 Differential Analysis > Flashcards

Flashcards in Chapter 12 Differential Analysis Deck (19)
Loading flashcards...
0
Q

Differential revenue?

A

A difference in revenue between any two alternatives

1
Q

Differential cost?

A

A difference in cost between any two alternatives

2
Q

Avoidable cost?

A

Can be eliminated by choosing one alternative over another

3
Q

Sunk cost?

A

Cost that has already been incurred and cannot be avoided regardless of what a manager decides to do

4
Q

Opportunity cost?

A

The potential benefit given up when one alternative is selected over another

5
Q

Are opportunity costs found in accounting records?

A

No but must be considered

6
Q

Value chain?

A

All activities from development to production to after-sales service

7
Q

Vertical integration?

A

When a company is involved in more than one activity in the entire value chain

8
Q

Make or buy decision?

A

Decision to carry out one of the activities in the value chain internally, rather than buy externally from a supplier

9
Q

Benefits of vertical integration? (3)

A

Less dependent on suppliers.
Control quality better by producing their own parts and materials.
Realize profits from the parts and materials that it’s making rather than buying as well as profits from its regular operations.

10
Q

Advantages of using external suppliers? (1)

A

Supplier with economies of scale can result in higher quality and lower costs

11
Q

Special order?

A

One-time order that’s not considered part of the company’s normal ongoing business

12
Q

Constraint?

A

Anything that prevents you from getting more of what you want

13
Q

How is the constraint/bottleneck determined?

A

By the step that limits total output because it has the smallest capacity.

14
Q

What is the key to increased profits?

A

Managing constraints!

15
Q

How to increase profits when constraints exist?

A

Produce the products with the highest contribution margin per unit of the constrained resource!

16
Q

What is relaxing (elevating) the constraint?

A

When increase capacity of the bottleneck

17
Q

Decision rule for a special order?

A

Do we have excess capacity?

- if not, wouldn’t pull workers to sell products for less

18
Q

Formula to find CM per constrained resource?

A

CM per unit/constrained resource