12–1    What is a relevant  cost?

12–2   Define the following terms: incremental cost, opportunity cost, and sunk  cost.

12–3  Are avoidable costs always relevant costs? Explain.

12–4 Depreciation (as shown on the income statement) is an expense to a company, but this same expense is irrelevant in decision making. Explain why this is so.

12–5 “Sunk costs are easy to spot—they’re simply the fixed costs associated with a decision.” Do you agree? Explain.

12–6  Are variable costs always relevant in decision making? Explain.

12–7 Davis Company is considering dropping one of its product lines. What costs of the product line would be relevant to this decision? Irrelevant?

12–8 “If a product line is generating a loss, then that’s pretty good evidence that the product line should be discontinued.” Do you agree?   Explain.

12–9  How does opportunity cost enter into the make or buy decision?

12–10   Which costs are relevant to special-order decisions?

12–11   What is a constraint?

12–12  List four ways to increase capacity at bottlenecks.

12–13   Define the following terms: joint products, joint product costs, and split-off point.

12–14 From a decision-making point of view, what pitfalls are there in allocating common costs among joint products?

12–15 What guideline can be used in determining whether a joint product should be sold at the split-off point or processed further?

12–16   Why should relevant costs be isolated when analyzing a decision situation?