You are watching: The potential benefit that is given up when one alternative is selected over another.
No not always. Variable expenses are pertinent costs only if they differ in complete in between the options under consideration.
"Sunk expenses are straightforward to spot—they"re the fixed prices linked with a decision." Do you agree? Explain.
No, not all resolved costs are sunk. Only those for which price has actually currently been irrevocably incurred. A variable expense is considered a sunk cost if its currently been incurred.
No, a variable cost is a cost that varies in full amount in direct proportion to transforms in the level of activity. A differential price yet is the difference in price in between 2 choices.
Prlure Company is considering dropping among its product lines. What costs of the product line would certainly be appropriate to this decision? What costs would be irrelevant?
Only costs that would be avoided as an outcome of dropping the product line are relevant. Costs that won"t be affected by the decision are irpertinent.
It would depend on the product and instance. But a product have to be discontinued just if the CM that will go ameans after dropping the product is less than the resolved prices linked with keeping the product.
What is the danger in allocating common resolved costs among assets or various other segments of an organization?
This can cause profitable segments to look unprofitable if widespread solved prices are alsituated among assets or various other segments of an company.
Opportunity price is the potential advantage that is offered up as soon as one alternate is schosen over an additional. In this situation suppliers should compare the benefits of either making a product in-house or outsourcing it and then choose the best decision.
• Little Italy"s just has 1 table open up. Available tables is the constraint.• The Mellow mushroom is understaffed Friday night. Available employees is the constraint.• I want to drive residence but my automobile is low on gas. Gas is the constraint.• I don"t have sufficient time to examine for both my exams over the weekfinish and also go downtvery own through my friends. Time is the constraint.
How will certainly relating product contribution margins to the amount of the constrained reresource they consume help a company maximize its profits?
Profits are maximized as soon as the contribution margin is maximized, assuming that resolved costs are not influenced. Company"s have the right to maximize their complete contribution margin by concentrating on the products via the greatest amount of contribution margin per unit of the constrained resource.
Joint products: two or even more commodities that are developed from a widespread suggest. Joint costs: prices that are incurred up to the split-off allude in a process that produces joint commodities. Split off point: the suggest in the manufacturing process wright here some or every one of the joint commodities deserve to be recognized as individual assets.
What pointer must be offered in determining whether a joint product need to be marketed at the split-off allude or processed further?
If the increpsychological revenue earned from better handling exceeds the increpsychological prices earned from even more processing, the product need to be processed even more.
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Airlines occasionally sell lessened rates throughout certain times of the week to members of a businessperson"s family if they accompany him or her on trips. How does the concept of relevant expenses enter right into the decision by the airline to offer decreased prices of this type?
Airlines have a lot of sunk prices and also expenses that don"t fluctuate due to the variety of passengers on the flight therefore they can offer reduced rates on seats that would otherwise be empty for this reason raising CM and also profit.
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