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12 Cards in this Set
- Front
- Back
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Relevant Costs |
- Incremental - Differential - Margin Avoidable, Opportunity Costs = Relevant, but hard to measure |
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Irrelevant Costs |
- Sunk Cost (cost that=already incurred) - Future Cost Don't differ between alternative and = Unavoidable |
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Avoidable Costs |
Cost that can be eliminated in whole or in part by choosing one alternative over another Relevant Cost |
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Differential Cost Approach |
Only relevant costs are considered (Costs that make a difference, can be eliminated, and can be avoidable) |
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Total Cost Approach |
All the revenue and costs are displayed in the income statement, then the difference in NOI between two alternatives is compared |
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Drop or Retain a Segment |
Drop segment if... Avoidable Fixed Costs > Contribution Margin Drop - Keep = Difference |
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Accepting Special Orders
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Accept if...
incremental revenue > incremental expense of producing it |
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Utilization of Constrained Resources |
Given bottleneck... emphasize products with greatest contribution margin per unit of constrained resource |
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Contraint |
Anything that prevents an organization from satisfying demand |
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Bottleneck |
When a constraint resource is a machine or work center |
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Joint Products |
Two or more products that are produced from a common input Continue processing joint products after the split-off point if... incremental revenue after further processing > incremental costs of more processing |
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Contribution Margin per unit of the Constrained Resource |
Contribution Margin Per Unit / Stitching Machine Time Required to Produce One Unit
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