Answered: “Managers should consider only…

“Managers should consider only additional revenues and separable costs when making decisions about selling at splitoff or processing further.”Do you agree? Explain.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter15: Lean Accounting And Productivity Measurement

Section: Chapter Questions

Problem 12DQ: Explain why changes in value-stream profitability may be better information than individual product...

See similar textbooks

Related questions

Q: Which of the following is not one of the benefits of breakeven analysis to businesses? A.…

A: A break-even analysis is a financial tool

Q: Management is considering a one-time-only special order. There is sufficient idle capacity to fill…

A: Introduction:- Management (or management) is the administration of a company, whether for-profit,…

Q: “ Managers must decide whether a product should be sold at splitoff or processed furthur.The sales…

A: No, any method that is used to assign costs to individual products that is applied to the problem of…

Q: Fixed costs are distributed, what is the profitability of the remaining services if the company…

A: Introduction:- Fixed costs are cannot be avoided. Fixed costs are distributed remaining…

Q: Briefly describe the treatment of Joint Costs when making a sell-or-process-further decision. What…

A: Joint costs are the costs which are incurred jointly in the production process for two or more…

Q: Managers have some flexibility in setting the estimated useful lives of depreciable assets. Explain…

A: The managers can determine the useful life of assets. The depreciation per year depends on this…

Q: Break-even analysis is of limited use to management because a company cannot survive by just…

A: Breakeven analysis involves comparison of fixed cost, variable cost and sales price to derive the…

Q: In a make versus buy decision which of the following factors is not relevant? fixed production…

A: Make or buy decision: Every company wants to maximize its net income. The best method to increase…

Q: Harrison Company determines that an opportunity cost of an alternate course of action is relevant to…

A: Opportunity costs refer to the amount of left-out benefit to attain another option, which means the…

Q: Does using cost volume profit sensitivity analysis have any drawbacks or possible negative impacts…

A: Cost volume profit analysis is used to control or monitor a sensitive analysis which depicts changes…

Q: Describe a situation in which the sales value at splitoff method cannot be used but the NRV method…

A: Relative Sales Value at Split off Method: Relative sales value at split off method allocates joint…

Q: Can a company use a target pricing model without a follow-on cost-savings sharing agreement? Why or…

A: Target price is the price at which the stock future price is estimated grounded on earnings…

Q: Faced with a long-run make-or-buy decision, the manager should do all of the following except: a.…

A: Ans. While considering a make - or- buy decision a manager is expected to do a lots of study and…

Q: Which of the following is not an underlying assumption of a conventional CVP analysis? Multiple…

A: Cost-volume-profit analysis is the most important tool that is used by managers to specify the cost…

Q: When deciding whether we should add or drop a product or segment, we should think about Multiple…

A: When deciding whether we should add or drop a product or segment, we should think about : the…

Q: Comparison between incremental revenues and incremental costs is the decision base for: a.…

A: Incremental revenue and incremental cost concept means where while taking any decision , we wants to…

Q: In a multi-product company, as the mix of the products being sold changes, the overall contribution…

A: Overall contribution margin is the mix of individual contribution margin with the weights of their…

Q: Managers often assume a strictly linear relationship between cost and volume. How can thispractice…

A: Cost: Cost can be defined as the cash and cash equivalent which is incurred against the products…

Q: Which of the following situations is most likely to pose a problem for companies that use return on…

A: Solution Concept Return on investment Return on investment means the return the…

Q: Managers must decide whether a product should be sold at splitoff or processed further. The sales…

A: Joint cost is the cost of assembling, that is incurred by an organization on a joint creation…

Q: If a firm operates at capacity, the minimum transfer price should be the: external market price any…

A: Solution: If a firm operates at capacity, the minimum transfer price should be the "external market…

Q: For which product(s) above would it be more profitable for Faustina to sell at the split-off point…

A: Here, we have to find out the most profitable product.

Q: Given the weaknesses of cost-based pricing, why wouldany company use this method?

A: Cost-based pricing means setting prices based on the cost of goods and services. The major…

Q: In what way can the use of ROI as a performance measure for investment centers lead to bad…

A: ROI: It is a measure on the amount of return on a particular investment with respect to the…

Q: In all respects, Company A and Company B are identical except that Company A’s costs are mostly…

Q: Explain to management the circumstance that would have to prevail for both marginal and absorption…

A: Marginal and absorption costing are two different approaches to dealing with fixed production…

Q: What other issues must the company consider in deciding whether to accept the business?

Q: Which of the following choices correctly denotes the data needed to allocate joint costs under the…

A: Cost accounting is the branch of accounting that inspects the cost structure of a business. This…

Q: Explain how a shift in the sales mix could result in both a higher break-even point and a lower net…

A: Sales mix involves the composition of different products and some products have a higher margin of…

Q: Lowering price does not always increase revenue with increased demand. Besides reducing price, what…

A: Reducing prices will not always stimulate demand to the desired extent especially in case of…

Q: When making decisions, managers should consider a. revenues that differ between alternatives. b.…

A: The explanation for the given options: a. A manager on the verge of making decisions must consider…

Q: Monopolists sometimes practice price discrimination to O a. get rid of surplus product. O b,…

A: Correct answer:Option d:Increase profit

Q: Consider a situation in which a firm needs to make a decision regarding the resources to allocate…

A: Cost accounting is the branch of accounting that inspects the cost structure of a business. This…

Q: How does targeted profit enter into the break-even units equation?

A: Every organisation desires to attain certain target profit. Therefore the organisation makes an…

Q: When comparing the lower of cost to market the appropriate market value is determined before…

A: The inventory costing approach known as the lower-of-cost-or-market (LCM) values inventory at the…

Q: Which of the following is not a feature of full cost plus sales pricing related to a range of a…

A: Following is the answer to the given question

Q: What is the estimated selling price of a product less any costs necessary to further process the…

A: Solution: Net realization value = estimated selling price of a product - costs necessary to further…

Q: 2. Refer to the data in case B above. In this case, there will be no savings in variable selling…

A: Transfer pricing is the price at which one division sells or provides goods or services to another…

Q: Which of the following costs are always incremental and relevant in decision analysis? a)…

A: Avoidable costs are those costs that can be avoided if some production is stopped or outsourcing of…

Q: When negotlating a transfer price, which price is most acceptable to the selling divislon if they…

A: A company may have two or more division in which two different goods are produced and one good can…

Q: In a cost-volume-profit analysis, explain what happens at the break-even point and why companies do…

A: Break-even point: It is that point in the business when all its costs have been recovered.…

Q: a. What amount of joint product cost would be allocate to each product? b. What is financial…

A: Lets understand the basics. For allocating joint process cost, there are various methods are…

Question

“Managers should consider only additional revenues and separable costs when making decisions about selling at splitoff or processing further.”Do you agree? Explain.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

When making decisions, managers should consider a. revenues that differ between alternatives. b. costs that do not differ between alternatives. c. only variable costs. d. sunk costs in their decisions.
The focus of a sell or process further decision is Select one: a. incremental cost. b. incremental revenue. c. neither incremental revenue nor incremental cost. d. both incremental revenue and incremental costs.
Profitability changes may be simply calculated by using what kind of tool: sales price/volume/variable costs/fixed costs.
Can someone help by providing an example of revenues and costs that would be impacted by outsourcing decision using ration analysis?
Can a company use a target pricing model without a follow-on cost-savings sharing agreement? Why or why not?
Relevant Cost for non-routine decision making: Sell or Process Further How much is the incremental profit/loss for product A, B, C
Which of the following is not an underlying assumption of a conventional CVP analysis? Multiple Choice Selling price per unit is unrelated to assumed sales volume. Inputs to the profit-planning model are known with certainty. Learning-curve effects (i.e., productivity gains with experience). Fixed costs, in total, do not change as sales mix or total sales volume change. Variable costs per unit are unrelated to changes in volume.
Explain why changes in value-stream profitability may be better information than individual product cost for certain decisions.
What concept relates to the proportionate savings in costs gained when levels of production are increased: A) Accounting profit. B) Economies of scale. C) Marginal costs. D) Barriers to entry. E) Economic profit. The benefit lost when choosing one option precludes receiving the benefits from an alternative option was referred to as: A) Irrelevant costs. B) Lost costs. C) Alternative costs. D) Opportunity costs. E) Sunk costs.
When deciding whether to sell as is or process a product further, managers should ignore which of the following? a. The costs of processing the product thus far b. The cost of processing further c. The revenue if the product is sold as is d. The revenue if the product is processed further
Which of the following is not an application of cost-volume-profit analysis? Setting prices for products and services. Performing strategic “what-if” analyses. Deciding whether to cut a product line. Determining the short-term cost or profit implications of many decisions. Deciding whether to make or buy a given product or service.
When deciding whether to sell as is or process a product further, managers should ignore which of the following? The costs of processing the product thus far The cost of processing further The revenue if the product is sold as-is The revenue if the product is processed further