Ch 25
Normal selling price
Cost amount per unit + Markup
Markup percentage
Desired profit + total selling and administrative expenses / total product cost
Desired profit
Desired rate of return x total assets
Activity rate
Estimated activity cost / estimated activity-base usage
Target cost
Expected selling price - desired profit
True
If the company is operating at full capacity, any additional production increases fixed and variable manufacturing costs. Selling and administrative expenses may also increase because of the additional business T/F
True
If the company is operating below full capacity, any additional production does not increase fixed manufacturing costs. T/F
Product cost per unit
Total product cost / Estimated units produced and sold
Theory of constraints
a manufacturing strategy that focuses on reducing the influence of bottlenecks on production process
Activity base
a measure of physical activity for each activity.
Target costing
a method of setting prices that combines market-based pricing with a cost-reduction emphasis.
Sunk costs
costs that have been incurred in the past, cannot be recouped, and are not relevant to future decisions
Activity based costing
identifies and traces costs and expenses to activities and then to specific products
Product cost concept
only the costs of manufacturing the product, termed the product costs, are included in the cost amount per unit to which the markup is added.
Differential cost
the amount of increase or decrease in cost that is expected from a course of action as compared to an alternative.
Differential revenue
the amount of increase or decrease in revenue that is expected from a course of action compared to an alternative.
Differential income
the difference between the differential revenue and differential costs
Differential analysis
(Sometimes called incremental analysis) analyzes differential revenues and costs in order to determine the differential impact on income of two alternative courses of action.
Production bottleneck
(or constraint) a point in the manufacturing process where the demand for the company's product exceeds the ability to produce the product
Markup per unit
Markup percentage x product cost per unit
Engineering change order
The document that initiates changing a product or process
Opportunity cost
The revenue that is forgone from an alternative use of an asset such as cash.
