1. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

2. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis, Product Pricing, and Activity-Based Costing Chapter 9

3. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Prepare differential analysis reports for a variety of managerial decisions. 1

4. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis o Managerial decision making involves choosing between alternative courses of action.

5. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Step 1:Identify the _______ of the _______ Step 2:Identify the _______ _______ of action Step 3:Gather relevant _______ and perform _______ _______. Step 4:Make a _______ Step 5: Review, _______, and _______ the results of the decision Differential Analysis o Managerial Decision Making

6. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis o _________ _________, sometimes called _________ _________, analyzes differential _________ and _________ to determine the differential _________ on income of two _________ _________ of action.

7. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis o _________ revenue is the amount of _________ or _________ in _________ that is expected from a course of action as compared to an _________.

8. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis o _________ cost is the amount of increase or decrease in _________ that is _________ from a course of action as compared to an _________.

9. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis o _________ income (loss) is the difference between the differential _________ and the differential _________. o Differential _________ indicates that a particular decision is expected to be ________, while a differential _________ indicates that the decision is expected to _________ _________.

10. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis o In this chapter, differential analysis is illustrated for the following common decisions:  __________________________________________

11. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Lease or Sell o The $80,000 book value of the equipment is a and is ___ considered in the differential analysis. o The $80,000 book value of the equipment is a _________ cost and is ___ considered in the differential analysis. o _________ costs are costs that have been incurred in the _________, _________ be recouped, and are _________ relevant to _________ _________.

12. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Discontinue a Segment or Product o Management may consider _________ a _________ or _________ of a business that is generating losses. Based on the information in the _________ income statement in Exhibit 3, management of Battle Creek Cereal Co. is considering discontinuing Bran Flakes.

13. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Replace Equipment o The revenue that is forgone from an _________ use of an asset, such as cash, is called an _________ _________. o Although the _________ _________ is _________ recorded in the accounting records, it is useful in analyzing _________ courses of action.

14. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Process or Sell o In some cases, a product can be sold at an _________ _________ of production, or it can be _________ _________ and then sold.

15. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Accept Business at a Special Price o The differential costs of accepting _________ _________ depend on whether the company is operating at _________ _________.  If the company is operating at, any additional production _________ fixed and _________ manufacturing costs.  If the company is operating at _____ _________, any additional production _________ fixed and _________ manufacturing costs.  If the company is operating below _____ _________, any additional production does _________ increase _________ manufacturing costs.

16. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Determine the selling price of a product, using the product cost concept. 2

17. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Setting Normal Product Selling Prices o The basic approaches to _________ prices are:  _________ methods _________-_________ concept _________-_________ concept  Cost-Plus Methods ________ cost concept ________ cost concept

18. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Setting Normal Product Selling Prices o The demand -based concept sets the price according to the _____ for the product. o The _____ -_____ concept sets the price according to the price _____ by ___________.

19. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Product Cost Concept o Under the _____ _____ concept, only the _______ of manufacturing the product, termed the, are included in the cost amount per unit to which the _______ is ______. o Under the _____ _____ concept, only the _______ of manufacturing the product, termed the _______ _______, are included in the cost amount per unit to which the _______ is ______.

20. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Product Cost Concept _______ the total product costs as follows: Step 1: _______ the total product costs as follows: Product costs: _______ _______ $XXX _______ _______ XXX Total _______ _______ $XXX

21. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Product Cost Concept _______ the total selling and _______ expenses. Step 2: _______ the total selling and _______ expenses.

22. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Product Cost per unit = Product Cost Concept Divide the _______ _______ _______ by the number of units _______ to be _______ and sold to determine the _______ _______ cost per unit, as shown below. Step 3: Divide the _______ _______ _______ by the number of units _______ to be _______ and sold to determine the _______ _______ cost per unit, as shown below.

23. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Product Cost Concept Compute the _______ _______ as follows: Step 4: Compute the _______ _______ as follows: Markup Percentage =

24. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Product Cost Concept Determine the markup per unit by __________ the markup percentage times the _______ ________ per unit as follows: Step 5: Determine the markup per unit by __________ the markup percentage times the _______ ________ per unit as follows: Markup per Unit = ______ ______ x _______ _______ ___ _______

25. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Total product _______ per _______ $XXX _______ per _______ XXX _______ _______ price per unit$XXX Product Cost Concept Determine the _______ selling price by _______ the markup per _______ to the _______ _______ per _______ as follows: Step 6: Determine the _______ selling price by _______ the markup per _______ to the _______ _______ per _______ as follows:

26. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Target Costing o _______ _______ is a method of setting prices that _______ market-based pricing with a _______- _______ emphasis. A future selling price is anticipated, using the demand-based or the competition-based methods. _______ Cost = _______ Selling _______ – Desired _______

27. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Target Costing o The planned cost reduction is sometimes referred to as the cost “_______”. Costs can be _______ in a variety of ways such as the following:  _______________________________________

28. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Compute the relative profitability of products in bottleneck production processes. 3

29. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Production Bottlenecks, Pricing, and Profits o A ____________ ____________ or constraint) is a point in the manufacturing process where the ____________ for the company’s product ____________ the ____________ to produce the product. o A ____________ ____________ (or constraint) is a point in the manufacturing process where the ____________ for the company’s product ____________ the ____________ to produce the product.

30. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Production Bottlenecks, Pricing, and Profits o The ____________ __ ____________ (TOC) is a manufacturing strategy that focuses on reducing the ____________ of ____________ on ____________ processes.

31. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Allocate product costs using activity-based costing. 4

32. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Activity-Based Costing Method o ________- ________ costing (ABC) ________ and ________ costs and expenses to ________ and then to ________ products. o ________ are the types of ________, or ________, involved in a manufacturing process or service activity.

33. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Activity Rates o The estimated activity costs are allocated to products using an ________ ________. ________ ________ are determined as follows: Activity Rate =

34. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Activity Rates o The ________ ________ is a measure of physical ________ for each ________. If setups are the activity base, then activity-base ________ is the number of setups ________ to be ________ by the operations.

35. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Dangers of Product Cost Distortion o Using an inappropriate ________ ________ ________ method can lead to ________ product costs.

36. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Appendix Total and Variable Cost Concepts to Setting Normal Price

37. T OTAL C OST C ONCEPT Under the ________ ________ ________, manufacturing cost _____ the selling and _____________ expenses are ________ in the total cost per unit. The ________ per unit is then computed and _______ to the total cost per unit to determine the ________ __________ price. Total cost ________ Expense ______________ Cost _____________ Expense

38. Markup percentage = T OTAL C OST C ONCEPT The ________ ________ is determined by applying the following formula: Selling Expense Manufacturing Cost Administrative Expense

39. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Variable Cost Concept o Under the ________ cost concept, only ________ costs are included in the cost ________ per ________ to which the ________ is added.

40. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Differential Analysis, Product Pricing, and Activity-Based Costing The End