Chapter 4 final

Question 1

Differential analysis refers to

Answer 1

the process of estimating revenues and costs of alternative actions available to decision makers and of comparing these estimates to status quo

Question 2

Differential costs

Answer 2

costs that differ among two or more alternatives; differential costs change in response to alternative couses of action

• may be both variable and fixed costs

Question 3

Sunk costs are

Answer 3

costs incurred in the past that cannot be changed by present or future decisions

Question 4

Special Orders:

Answer 4

1. an order that will not affect other sales and is usually a short-run occurrence
2. Decision makers focus on differential costs when deciding to accept a special order
3. Usually accepted when idle capacity is adequate for the job
4. A qualitative factor to consider is the effect that the special order sale will have on regularly priced units

Question 5

Financial staatements prepared in accordance with GAAP do not routinely

Answer 5

provide differentail cost information