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9 Cards in this Set
- Front
- Back
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Differential analysis
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Differential analysis looks at effects of different courses of action
Uses estimated revenues, costs Focuses on relevant revenues, costs Sunk costs are past costs that are not relevant |
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Differential Revenue
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Increase or decrease in revenue derived from a particular course of action compared to an alternative
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Differential Costs
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Increase or decrease in costs derived from a particular course of action compared to an alternative
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Opportunity Costs
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Measures the cost of an alternative choice that is foregone
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ROLE OF COST CONCEPT
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Uses “cost +” to set selling price that provides sufficient profit.
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3 COST DETERMINANTS
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Total cost concept
Markup added to total cost Product cost concept Markup added to product costs Variable cost concept Markup added to variable costs |
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MARKUP FORMULA:Total Cost
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Markup % =
Desired profit / Total cost |
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MARKUP FORMULA:Product Cost
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Markup % =
(Desired profit + Selling, Administrative expense) / Manufacturing cost |
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MARKUP FORMULA:Variable Cost
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Markup % =
(Desired profit + Total fixed costs) / Total variable costs |
