Flashcards
Chapter 12 Key terms
Cards in this deck (25)
- 1Avoidable CostA cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with Differential Cost and Relevant Cost.
- 2BottleneckA machine or some other part of a process that limits the total output of the entire system.
- 3ConstraintA 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.
- 4Differential CostA future cost that differs between any two alternatives.
- 5Differential RevenueFuture revenue that differs between any two alternatives.
- 6Incremental CostAn increase in cost between two alternatives.
- 7Joint CostsCosts that are incurred up to the split-off in a process that produces joint products.
- 8Joint ProductsTwo or more products that are produced from a common input.
- 9Make or Buy DecisionA decision concerning whether an item should be produced internally or purchased from an outside supplier.
- 10Opportunity CostA potential benefit that is given up when one alternative is selected over another.
- 11Relaxing (or elevating) the ConstraintAn action that increases the amount of a constrained resource. Equivalently, an action that increases the capacity of the bottleneck.
- 12Relevant BenefitA benefit that should be considered when making decisions.
- 13Relevant CostA cost that should be considered when making a decision.
- 14Sell or Process Further DecisionA decision as to whether a joint product should be sold at the split-off point or sold after further processing.
- 15Special OrderA one-time order that is not considered part of the company's normal ongoing business.
- 16Split-off PointThat point in the manufacturing process where some or all of the joint products can be recognized as individual products.
- 17Sunk CostA cost that has already been incurred and that cannot be changed by any decision made now or in the future.
- 18Vertical IntegrationThe 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.
- 19Cost-plus PricingA pricing method in which a predetermined markup is applied to a cost base to determine the target selling price.
- 20Economic Value to the Customer (EVC)The price of a customer's best alternative (called the reference value) plus the value of that differentiates a product that alternative (called the differentiation value).
- 21MarkupThe difference between the selling price pf a product or service and its cost. The markup is usually expressed as a percentage of cost.
- 22Price Elasticity of DemandA measure of the degree to which a change in price affects the unit sales of a product or service.
- 23Target CostingThe process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure.
- 24Value-based PricingA pricing method in which a company establishes selling prices based on the economic value of the benefits that their products and services provide to customers.
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