Managerial Accounting Ch. 12
relevant benefit
A benefit that differs between alternatives in a decision. Ex: differential revenue
avoidable cost
A cost that can be eliminated by choosing one alternative over another in a decision. Synonymous with differential cost and relevant cost
sell or process further decision
A decision as to whether a joint product should be sold at the split-off point or sold after further processing
make or buy decision
A decision concerning whether an item should be produced internally or purchased from an outside supplier
differential cost
A difference in cost between any two alternatives
relevant cost
A difference in cost between any two alternatives. Synonymous with avoidable cost, differential cost, and incremental cost
differential revenue
A difference in revenue between any two alternatives
constraint
A limitation under which a company must operate, such as limited available machine time or raw materials, that restricts the company's ability to satisfy demand
bottleneck
A machine or some other part of a process that limits the total output of the entire system
special order
A one-time order that is not considered part of the company's normal ongoing business
relaxing (or elevating) the constraint
An action that increases the amount of a constrained resource. Equivalently, an action that increases the capacity of the bottle neck
sunk cost
Any cost that has already been incurred and that cannot be changed by any decision made now or in the future
joint costs
Costs that are incurred up to the split-off point in a process that produces joint products
split-off point
That point in the manufacturing process where some or all of the joint products can be recognized as individual products
vertical integration
The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service
opportunity cost
The potential benefit that is given up when one alternative is selected over another
joint products
Two or more products that are produced from a common input