Podcast
Questions and Answers
What is excluded from Baxter Battery's existing cost system?
What is excluded from Baxter Battery's existing cost system?
- Organization-sustaining costs
- Customer orders and design changes
- Indirect factory wages and factory equipment depreciation
- Direct materials, direct labor, and shipping (correct)
What percentage of indirect factory wages is consumed by customer orders?
What percentage of indirect factory wages is consumed by customer orders?
- 35%
- 25%
- 30% (correct)
- 20%
What are the total activities for the 'factory equipment depreciation' cost pool?
What are the total activities for the 'factory equipment depreciation' cost pool?
- 800,000 machine-hours (correct)
- 10,000 customer orders
- 4,000 design changes
- 2,000 customers served
What will not be assigned to products or customers?
What will not be assigned to products or customers?
How many batteries were ordered for 'SureStart LongLife'?
How many batteries were ordered for 'SureStart LongLife'?
Which product requires new design resources?
Which product requires new design resources?
What is the total number of customer orders for Baxter Battery?
What is the total number of customer orders for Baxter Battery?
When analyzing a special order, which costs and benefits are relevant?
When analyzing a special order, which costs and benefits are relevant?
What is the opportunity cost?
What is the opportunity cost?
In volume trade-off decisions, what should a company do when it does not have enough capacity to produce all products and sales volumes demanded?
In volume trade-off decisions, what should a company do when it does not have enough capacity to produce all products and sales volumes demanded?
What should a company focus on when a limited resource restricts its ability to satisfy demand?
What should a company focus on when a limited resource restricts its ability to satisfy demand?
What is the constrained resource in Ensign Company's production?
What is the constrained resource in Ensign Company's production?
What is the opportunity cost if the space to make Part 4A had an alternative use?
What is the opportunity cost if the space to make Part 4A had an alternative use?
What represents allocated costs common to all items produced in the factory and would continue unchanged?
What represents allocated costs common to all items produced in the factory and would continue unchanged?
What is the financial advantage of accepting the special order for Jet Inc.?
What is the financial advantage of accepting the special order for Jet Inc.?
What are the avoidable costs associated with making part 4A?
What are the avoidable costs associated with making part 4A?
What approach is used to decide whether to retain or drop the digital watch segment?
What approach is used to decide whether to retain or drop the digital watch segment?
Why is the contribution margin approach necessary for decision-making?
Why is the contribution margin approach necessary for decision-making?
What is the key to effective decision-making?
What is the key to effective decision-making?
What would be the operating profit loss for the company if the digital watch segment is dropped?
What would be the operating profit loss for the company if the digital watch segment is dropped?
In decision-making, when are sunk costs considered relevant?
In decision-making, when are sunk costs considered relevant?
Why can allocated fixed costs distort the decision to keep or drop a segment?
Why can allocated fixed costs distort the decision to keep or drop a segment?
What is crucial in decision-making according to the text?
What is crucial in decision-making according to the text?
What is an example of a sourcing decision presented in the text?
What is an example of a sourcing decision presented in the text?
When making decisions, what needs to be considered according to the text?
When making decisions, what needs to be considered according to the text?
What should the decision to make or buy a part consider besides the cost comparison?
What should the decision to make or buy a part consider besides the cost comparison?
What is the total machine-hours required for SureStart batteries?
What is the total machine-hours required for SureStart batteries?
What financial advantage should the decision to make a part internally consider?
What financial advantage should the decision to make a part internally consider?
How many separate orders were placed for the 400,000 batteries?
How many separate orders were placed for the 400,000 batteries?
What is the total machine-hours required for LongLife batteries?
What is the total machine-hours required for LongLife batteries?
Study Notes
Key Concepts in Decision-Making and Differential Analysis
- 400,000 batteries ordered with 6,000 separate orders
- SureStart requires 36 minutes of machine time for a total of 480,000 machine-hours
- 4,000 custom designs prepared
- LongLife requires 48 minutes of machine time for a total of 320,000 machine-hours
- Decision-making involves choosing from at least two alternatives
- Identifying relevant costs and benefits is crucial in decision-making
- The key to effective decision-making is differential analysis
- Sunk costs are always irrelevant when choosing among alternatives
- Future costs and benefits that do not differ between alternatives are irrelevant
- Opportunity costs need to be considered when making decisions
- Identifying relevant costs using an example of Cynthia's decision to drive or take the train
- Total cost approach versus differential cost approach in decision-making
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Description
Test your understanding of decision-making and differential analysis with this quiz. Explore key concepts such as relevant costs, sunk costs, opportunity costs, and the role of differential analysis in effective decision-making. Dive into scenarios and examples to grasp the total cost approach versus the differential cost approach.
