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RELEVANT COST :
Q 13-2
INCREMENTAL COST :
OPPORTUNITY COST
The potential benefit that is given up when one alternative is selected over another.
SUNK COST :
A cost that has already been incurred and that cannot be charged by any decision
made now or in the future.
Q 13-3
Variable cost always relevant cost because each product cost different another
product cost. Variable cost that varies, in total, in direct proportion to changes in
the level of activity. Variable cost is constant per unit. Relevant cost different
between alternative in a decision making. Therefore, that is different between cost.
Q 13-4
Sunk cost are easy to spot- they’re simply the fixed costs associated with a
decision. I’m agree because fixed cost in any company or manufacturing not always
to chages. Example machine, when accour flood the machine is defective, so
company have shoulder sunk cost.
Q 13-5
Variable cost and differential cost mean the same thing. I’m not agree. Because
differential cost same with relevant cost. Relevant and differeantial cost differs
between alternative in a decision.
Q 13-6
All future cost are relevant in decision making. I’m agree because for business we
are look future cost to make a decision making. Future cost can allown to avoid net
operating income to loss or compony cannot going in business.
EXERCISE 13-2
to racing bikes
(-) fixed cost that can be avoided if the racing bike line is discontinued 28000
Therefore, based on the data given, the racing bike should be continued a more
profitable use can be found for the floor and counter space that it is accupying.
EXERCISE 13-3
Cost $90000 less to make carboretors to buy them from the outside supplier, Troy
engines should reject the outside supplier’s offer. However, the company may wish
to consider one additional factor before coming to a final decision. The opportunity
cost of the space now being used to produce the carburetors.
b) make buy
Assume that the space now being used to produce carburetor could be used to
produce a segment margin of 150000 per year. Under these conditions, Troy
engines shoul accept the supplier’s offer and use the available space to produce the
new product line.
EXERCISE 13-4
$ 169.95 price on the special order is below the normal $189.95 unit product cost
and the would required additional cost, the order would decresed net operating loss.
In general, as special order is loss if the incremental revenue from the special order
reduction the incremental cost of the order. The special order should reject this
offer because this offer be affected net operating loss.
EXERCISE 13-5
A B C
EXERCISE 13-6
A B C
The company would be better off selling the undyed product rather than processing
it futher. The product should be processed futher and dyed before selling them.