BUS 371 CH 13 KEY TERMS

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BUS 371 CH 13 KEY TERMS
Jamie Plym
Flashcards by Jamie Plym, updated more than 1 year ago
Jamie Plym
Created by Jamie Plym over 1 year ago
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Avoidable cost A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with differential cost and relevant cost.
Bottleneck A machine or some other part of a process that limits the total output of the entire system.
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.
Differential cost A future cost that differs between any two alternatives.
Differential revenue Future revenue that differs between any two alternatives.
Incremental cost An increase in cost between two alternatives.
Joint costs Costs that are incurred up to the split-off point in a process that produces joint products.
Joint products Two or more products that are produced from a common input.
Make or buy decision A decision concerning whether an item should be produced internally or purchased from an outside supplier.
Opportunity cost The potential benefit that is given up when one alternative is selected over another.
Relaxing (or elevating) the constraint An action that increases the amount of a constrained resource. Equivalently, an action that increases the capacity of the bottleneck.
Relevant benefit A benefit that should be considered when making decisions.
Relevant cost A cost that should be considered when making decisions.
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.
Special order A one-time order that is not considered part of the company’s normal ongoing business.
Split-off point That point in the manufacturing process where some or all of the joint products can be recognized as individual products.
Sunk cost A cost that has already been incurred and that cannot be changed by any decision made now or in the future.
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.
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