- allocated costs
- costs that are generated by non–revenue generating portions of the business, such as corporate headquarters, that are assigned based on some formula to the revenue generating portions of the business
- avoidable cost
- cost that can be eliminated (in whole or in part) by choosing one alternative over another
- bottleneck
- point at which a constraint slows production
- constraint
- scarce resource that limits output or productive capacity of an organization
- differential analysis
- type of analysis that considers only the differences between variables that are important to the analysis
- differential cost
- difference between costs for alternatives
- differential revenue
- difference between revenues for alternatives
- irrelevant cost
- cost that has no effect on the decision being made because it is the same under either alternative
- irrelevant revenue
- revenue that has no effect on the decision being made
- joint costs
- costs that have been shared by products up to the split-off point
- normal capacity
- company’s maximum production level, without adding additional production resources, or within the company’s relevant range
- opportunity costs
- costs associated with not choosing the other alternative
- outsourcing
- act of using another company to provide goods or services that your company requires
- qualitative factor
- component of a decision-making process that cannot be measured numerically
- quantitative factor
- component of a decision-making process that can be measured numerically
- relevant cost
- cost that influences the decision being made
- relevant range
- quantitative range of units that can be produced based on the company’s current productive assets; for example, if a company has sufficient fixed assets to produce up to 10,000 units of product, the relevant range would be between 0 and 10,000 units
- relevant revenue
- revenue that influences the decision being made
- segment
- portion of the business that management believes has sufficient similarities in product lines, geographic locations, or customers to warrant reporting that portion of the company as a distinct part of the entire company
- short-term decision analysis
- determining the appropriate elements of information necessary for making a decision that will impact the company in the short term, usually 12 months or fewer, and using that information in a proper analysis in order to reach an informed decision among alternatives
- special order
- one-time order that does not typically affect current sales
- split-off point
- point at which some products are removed from production and sold while others receive additional processing
- sunk cost
- cost that cannot be avoided because it has already occurred
- unavoidable cost
- cost that does not go away in the short-run by choosing one alternative over another
- unit contribution margin
- selling price per unit minus variable cost per unit
- unit contribution margin per production restraint
- unit contribution margin divided by the production restrain