ACCT 6521 Exam 2 Study Guide | Accounting Review, Key Concepts & Practice
Questions
Avoidable Cost - ANS ✔✔Potential future costs an organization can circumvent by choosing a
particular course of action. Costs must differ among decision alternatives
Avoidable Cost (example) - ANS ✔✔Materials cost for 2 different products is different
Batch Level Costs - ANS ✔✔Cost associated with producing a batch of products, allocated using
cost drivers that measure activity levels
Batch Level Cost (Example) - ANS ✔✔Setting up a press to print
Bottleneck - ANS ✔✔a constraint that limits a company's capacity to produce or sell its products
Bottleneck (example) - ANS ✔✔piece of equipment that cannot produce enough component
parts to fully occupy employees in the assembly department
Certified Suppliers - ANS ✔✔suppliers who have demonstrated reliability by providing the buyer
with quality goods and services at desirable prices, usually in accord with strict delivery
specifications
Contraints - ANS ✔✔conditions that limit a business's ability to satisfy the demand for its
products
Differential Revenue - ANS ✔✔Revenues that are relevant to decision making because they
differ among alternative courses of action
, Equipment Replacement Decisions - ANS ✔✔Deciding whether to replace existing equipment
with newer equipment based on comparing the avoidable costs of keeping the old equipment
or purchasing new equipment to determine which choice is more profitable.
Facility Level Costs - ANS ✔✔Costs incurred to support the whole company or a segment therof;
not related to any specific product, batch, or unit of production or service
Low-ball pricing - ANS ✔✔Supplier practice of pricing a product below competitors' prices to
attract customers and then raising the price once customers depend on the supplier for the
product.
Opportunity Cost - ANS ✔✔Cost of lost opportunities such as revenue forgone because of
insufficient inventory
Outsourcing - ANS ✔✔Buying goods and services from an outside company rather than
producing them internally
Product-Level Costs - ANS ✔✔Costs incurred to support specific products or services; allocated
based on the extent to which they sustain the product or service, and avoidable by eliminating
the product line or type of service.
Qualitative Characteristics - ANS ✔✔Features of information such as company reputation,
employee welfare, and customer satisfaction that cannot be quantified but may be relevant to
decision making.
Quantitative Charcteristics - ANS ✔✔features of information that can be mathematically
measured, such as the dollar amounts of revenues and expenses, often relevant to decision
making
Relaxing the constraints - ANS ✔✔Opening bottlenecks that limit the profitable operations of a
business
Questions
Avoidable Cost - ANS ✔✔Potential future costs an organization can circumvent by choosing a
particular course of action. Costs must differ among decision alternatives
Avoidable Cost (example) - ANS ✔✔Materials cost for 2 different products is different
Batch Level Costs - ANS ✔✔Cost associated with producing a batch of products, allocated using
cost drivers that measure activity levels
Batch Level Cost (Example) - ANS ✔✔Setting up a press to print
Bottleneck - ANS ✔✔a constraint that limits a company's capacity to produce or sell its products
Bottleneck (example) - ANS ✔✔piece of equipment that cannot produce enough component
parts to fully occupy employees in the assembly department
Certified Suppliers - ANS ✔✔suppliers who have demonstrated reliability by providing the buyer
with quality goods and services at desirable prices, usually in accord with strict delivery
specifications
Contraints - ANS ✔✔conditions that limit a business's ability to satisfy the demand for its
products
Differential Revenue - ANS ✔✔Revenues that are relevant to decision making because they
differ among alternative courses of action
, Equipment Replacement Decisions - ANS ✔✔Deciding whether to replace existing equipment
with newer equipment based on comparing the avoidable costs of keeping the old equipment
or purchasing new equipment to determine which choice is more profitable.
Facility Level Costs - ANS ✔✔Costs incurred to support the whole company or a segment therof;
not related to any specific product, batch, or unit of production or service
Low-ball pricing - ANS ✔✔Supplier practice of pricing a product below competitors' prices to
attract customers and then raising the price once customers depend on the supplier for the
product.
Opportunity Cost - ANS ✔✔Cost of lost opportunities such as revenue forgone because of
insufficient inventory
Outsourcing - ANS ✔✔Buying goods and services from an outside company rather than
producing them internally
Product-Level Costs - ANS ✔✔Costs incurred to support specific products or services; allocated
based on the extent to which they sustain the product or service, and avoidable by eliminating
the product line or type of service.
Qualitative Characteristics - ANS ✔✔Features of information such as company reputation,
employee welfare, and customer satisfaction that cannot be quantified but may be relevant to
decision making.
Quantitative Charcteristics - ANS ✔✔features of information that can be mathematically
measured, such as the dollar amounts of revenues and expenses, often relevant to decision
making
Relaxing the constraints - ANS ✔✔Opening bottlenecks that limit the profitable operations of a
business
