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26 Cards in this Set
- Front
- Back
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The predicted future costs and revenues that differ among the alternatives
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Relevant information
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Accountants should use two criteria to
determine whether information is relevant |
1. Information must be an
expected revenue or cost and 2. It must have an element of difference among the alternatives |
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Internal (management accounting) reporting that emphasizes the distinction between variable and fixed costs for the purpose of better decision making
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Contribution Approach
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1. Setting the price of a new or refined product
2. Setting the price of products sold under private labels 3. Responding to a new price of a competitor 4. Pricing bids in both sealed and open bidding situations |
Pricing Decisions
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All competing firms sell the same type of product at the same price
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Perfect competition
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The additional cost resulting
from producing and selling one additional unit |
Marginal cost
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The additional revenue
resulting from the sale of one additional unit |
Marginal revenue
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The price a firm charges for a unit will influence the quantity of units it sells
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Imperfect competition
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The effect of price changes on sales volume
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Price elasticity
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Setting prices by computing an
average cost and adding a markup (the amount by which sales price exceeds cost) |
Cost-Plus pricing
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The difference in total cost between two alternatives
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Differential cost
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The difference in total revenue between two alternatives
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Differential revenue
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Additional costs or reduced
benefits generated by the proposed alternative |
Incremental costs
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The additional revenues or reduced
costs generated by the proposed alternative |
Incremental benefits
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An analysis of the additional costs and benefits of a proposed alternative
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Incremental analysis
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The maximum available contribution to profit forgone (or passed up) by using limited resources for a particular purpose
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Opportunity cost
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Costs that will not continue if an ongoing operation is changed or deleted
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Avoidable costs
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Costs that continue even if an operation is halted
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Unavoidable costs
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Costs of facilities and services that are shared by users
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Common costs
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Focuses on the Income Statement and supporting schedules or budgeted expenses
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Operating budget (Profit plan)
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Focuses on the effects that the operating budget and other plans will have on cash balances
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Financial budget
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The Cash budget contains these major sections
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available cash balance
net cash receipts and disbursements financing |
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Differences between actual results and the static budget for level of output achieved
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Static-budget variances
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Differences between actual results and the flexible budget
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Flexible-budget variances
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The degree to which a goal, objective, or target is met
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Effectiveness
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The degree to which inputs are used in relation to a given level of outputs
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Efficiency
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