1. What are relevant costs and how do they affect the financial statements? When looking at relevant costs how do sunk costs play a role in your decision making process?
2. Cost-volume-profit (CVP) analysis is a key step in many decisions. CVP analysis involves specifying a model of the relations among the prices of products, the volume or level of activity, unit variable costs, total fixed costs, and the sales mix. This model is used to predict the impact on profits of changes in those parameters. Explain how changes in activity affect contribution margin and net operating income.
3. What is a responsibility center? What are the actual responsibility centers and how are they used to control costs?