Managerial final
When should a special order be accepted?
When the incremental revenue from the special order exceeds the incremental costs of the order
a business segment should only be dropped if
a company can save more in fixed costs that it loses in contribution margin
The machine process that is limiting overall output is a
bottleneck
a 12 month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed
continuous or perpetual budget
Ways to increase capacity of bottleneck
investing in additional machines at the bottleneck, shifting workers from the processes that isn't bottlenecks to the process that is the bottleneck
possible advantages of making a product rather than buying it
less dependence on outside suppliers, a smoother flow of parts and materials for production
a decision to carry out one of of the activities in the value chain internally rather than buy externally from a supplier
make or buy decision
The best way to handle a constrained resource is to
maximize the capacity of the bottleneck
to maximize total contribution margin when a constrained resource exists
produce the products with the highest contribution margin per unit of the constrained resource
important chart (order of budgets)
sales budget->selling and admin expense budget production budget-><-ending inventory budget DM DL MOH Cash budget Budgeted income statement Budgeted balance sheet
contribution margin per unit=
selling price per unit-variable cost per unit