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30 Cards in this Set
- Front
- Back
Relevant Information
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1. differs among the alternatives under consideration
2. is future oriented |
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sunk cost
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incurred in past transactions; not relevant for current decisions
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Relevent (differential) revenues
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1. future oriented
2. differ for alternatives under consideration |
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relevant (avoidable) costs
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Unit-level activities (avoid by elim. 1 u of product)
Batch-level activities (elim 1 batch) Product-level (elim product line) Facility-level (avoid some costs if production line is elim.) |
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Unit-level costs
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direct mat. and labor
inspections packaging ship and handling |
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Product-level costs
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Quality inspection costs
engineering design costs costs of obtaining and defending patents regulation compliance inventory holding costs |
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Facility-level costs
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rent/depreciation
administrative and training property tax insurance maintenance CGS Segment and corporate level: unavoidable |
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opportunity costs
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not cumulative; relevant
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Special order
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accept/reject
1. det amount rel. rev. earn by accepting 2. det. amt. rel. cost incurred by accepting 3. accept if rel. rev > rel. cost *should come from outside normal sales; not apply to repeat business; reject if at full capacity |
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Outsourcing
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1. det prod. costs avoid if outsource (not facility-lvl)
2. compare avoidable prod. costs w/cost of buying product and selecting lower lvl cost option |
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Negatives of outsourcing
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decreases vertical integration
may use lowball pricing quality delivery displease employees; lower productivity and loyalty |
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segment elimination
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1. det amount rel. rev. that pertains to elim. division
2. det amt. cost avoid if elim division 3. if rel. rev is <= avoid cost, elim division *disrupts employees lives |
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accept:
Special order Outsource Elimination if affects: |
unit, batch
u, b, p u, b, p, f |
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Equipment replacement
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1. det rel costs if keep
2. det costs incurred if purchase new |
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cost objects
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products
processes departments activities |
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cost of accumulation
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determines cost of objects
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cost driver
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cause/effect relationship
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cost allocation
allocation rate |
TC/cost driver x weight of driver = per/cost object
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cost pool
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accumulate many individual costs and then allocate to cost objects
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joint costs
split off point |
materials
labor overhead become separate $ allocated based on rel. sales value at split-off point; positive gross margin |
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cost allocation of machinery use
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allocate utility using machine hours
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activity based cost driver (ABC)
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1. costs assigned to pools based on activities that cause them to be incurred
2. costs allocated using a variety of drivers |
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Budgeting
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planning of financial matters
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Strategic planning
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long –term planning/overall objectives
o Which products to manufacture and sell and which market niches to pursue |
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Capital budgeting
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intermediate investment planning
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Operations budgeting
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short-term, used to create master budget
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Master budget
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detailed objectives; one year
Supports planning, coordination, performance, measurement, and corrective action |
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Participative budgeting
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subordinate participation in process; encourages more realistic goals
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Operating budget
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detailed schedules and budgets
-Sales budget and schedule of cash receipts 1: Projected sales/month: cash sales + sales on account = total budgeted sales 2: Schedule of cash receipts for projected sales: Current cash sales + collection of accounts receivable = total budgeted collections Pro forma financial statement data: Total accounts receivable balance and total budgeted sales (revenue; sum of total monthly amounts) |
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Inventory purchases budget
1: projected purchases: budgeted C/GS + desired ending inventory (x% times following month’s C/GS) = total inventory needed less beginning inventory (EI of previous month) = Required purchases (on account) • 2: schedule of cash payments for inventory purchases: Pay x% of current month acct. pay. + x% of prior month acct. pay. = total budgeted disbursements for inventory • Pro forma: Total C/GS (Sum of monthly C/GS), EI as of final date (EI in final month), Acct. Pay (remaining x% to be paid in following month) |
1: projected purchases: budgeted C/GS + desired ending inventory (x% times following month’s C/GS) = total inventory needed less beginning inventory (EI of previous month) = Required purchases (on account)
2: schedule of cash payments for inventory purchases: Pay x% of current month acct. pay. + x% of prior month acct. pay. = total budgeted disbursements for inventory Pro forma: Total C/GS (Sum of monthly C/GS), EI as of final date (EI in final month), Acct. Pay (remaining x% to be paid in following month) |