When deciding whether to accept a special order which of the following is irrelevant?

When deciding whether to accept a special order which of the following is irrelevant?

This preview shows page 3 – 6 out of 12 pages. When deciding whether to accept a special order, we should compare the extra revenues we will receive against the extra costs we will incur to fill the order. Costs that we will incur whether or not we fill the order are irrelevant to our decision.

Which of the following is relevant when deciding whether to drive or fly home for semester break?

Which of the following is relevant when deciding whether to drive or fly home for semester break? Cost of gasoline, wear and tear on your vehicle, and cost of plane ticket. ALL OF THESES COSTS ARE RELEVANT.

When deciding if a special order should be accepted?

A special order generally should be accepted if: A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.

When the extra revenue from processing further is less than?

Calculate the Price

Which of the following best describes a “sunk cost”? Costs that were incurred in the past and cannot be changed
When the extra revenue from processing further is less than the extra cost of processing further, the best decision would be to not process further

When deciding whether to accept a special order managers need to consider whether they have available excess capacity?

When deciding whether to accept a special order, managers need to consider whether they have available excess capacity. If the expected increase in revenues from a special order is greater than the expected increase in variable and fixed costs, then the special order should be accepted.

What factors should be considered before accepting the order?

When deciding whether to accept a special order, management must consider several factors:

  • The capacity required to fulfill the special order.
  • Whether the price offered by the buyer will cover the cost of producing the products.
  • The role of fixed costs in the analysis.
  • Qualitative factors.

When making a one time special order decision a company can ignore fixed overhead because?

You exclude fixed costs from your special order because they’re already covered by your regular sales; however, an $8 unit price wouldn’t cover the full cost of the product in normal production.

When a company is involved in more than one activity?

Question: A Company Involved In More Than One Activity In The Entire Value Chain Is Said To Be: Multiple Choice Constrained.

Which of the following costs are irrelevant in decision making?

Irrelevant costs are those that will not change in the future when you make one decision versus another. Examples of irrelevant costs are sunk costs, committed costs, or overheads as these cannot be avoided.

Which of the following costs are always irrelevant in decision making?

Sunk costs are those costs that happened and there is not one thing we can do about it. These costs are never relevant in our decision making process because they already happened! These costs are never a differential cost, meaning, they are always irrelevant.

Which costs are always relevant in decision making?

Variable costs are always relevant costs. An avoidable cost is a cost that can be eliminated (in whole or in part) by choosing one alternative over another. A sunk cost is a cost that has already been incurred and cannot be avoided regardless of what action is chosen.

Are sunk costs relevant in decision making?

A sunk cost is a cost that cannot be recovered or changed and is independent of any future costs a business might incur. Because a decision made today can only impact the future course of business, sunk costs stemming from earlier decisions should be irrelevant to the decision-making process.

How do unit variable costs behave?

The total variable costs changes proportionately with respect to the changes in the level of activity. However, the unit variable costs remains constant irrespective to the changes in the level of activity.

Which if the following is an example of manufacturing overhead expense in a factory?

Some examples of manufacturing overhead costs include the following: depreciation, rent and property taxes on the manufacturing facilities. depreciation on the manufacturing equipment. managers and supervisors in the manufacturing facilities.

What type of cost remains the same per unit at every level of activity?

Variable cost

Which of the following is an example of manufacturing overhead?

Examples of manufacturing overhead costs are: Rent of the production building. Property taxes and insurance on manufacturing facilities and equipment. Communication systems and computers for a manufacturing facility.

What is included in overhead costs in manufacturing?

Manufacturing overhead cost is the sum of all the indirect costs which are incurred while manufacturing a product. Usually manufacturing overhead costs include depreciation of equipment, salary and wages paid to factory personnel and electricity used to operate the equipment.

How do you calculate overhead costs?

The overhead rate or the overhead percentage is the amount your business spends on making a product or providing services to its customers. To calculate the overhead rate, divide the indirect costs by the direct costs and multiply by 100.

Which of the following is not included in manufacturing overhead?

Manufacturing overhead does not include any of the selling or administrative functions of a business. Thus, the costs of such items as corporate salaries, audit and legal fees, and bad debts are not included in manufacturing overhead.

What are the two basic types of costing systems?

There are two main cost accounting systems: the job order costing and the process costing.

How do you calculate fixed overhead allocation?

Divide the total in the cost pool by the total units of the basis of allocation used in the period. For example, if the fixed overhead cost pool was $100,000 and 1,000 hours of machine time were used in the period, then the fixed overhead to apply to a product for each hour of machine time used is $100.

What is the formula for predetermined overhead rate?

A predetermined overhead rate is calculated at the start of the accounting period by dividing the estimated manufacturing overhead by the estimated activity base.

How do you calculate plantwide overhead rate?

To calculate the plantwide overhead rate, first divide total overhead by the number of direct labor hours used to find the overhead per labor hour. Next, multiply the overhead per labor hour by the number of labor hours used to produce each unit.

When the actual overhead is more than the absorbed overhead it is called?

If the absorbed overheads at predetermined rates are greater than actual overheads, this is known as OVER-ABSORPTION. Conversely, if absorbed overheads ae less than the actual overheads, this is known as UNDER-ABSORPTION. The predetermined overhead absorption rate for direct labour hours was Rs.

What are the major reasons for using predetermined overhead rates?

Predetermined rates make it possible for companies to estimate job costs sooner. Using a predetermined rate, companies can assign overhead costs to production when they assign direct materials and direct labor costs.

Why estimated overhead is used?

Using this calculation gives the best possible estimation of costs based on relatively comfortable overhead estimations. If a business uses an actual overhead cost, they would not be able to determine true costs until after the production has actually happened.

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