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17 Cards in this Set
- Front
- Back
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 (p.532) |
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Bottleneck |
A machine or some other part of a process that limits the total output of the entire system - constraint (p. 547) |
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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. (p.547) |
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Differential Cost |
A difference in cost between any two alternatives (p.532) |
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Differential Revenue |
A difference in revenue between any two alternatives (p. 532) |
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Joint costs |
Costs that are incurred up to the split-off point in a process that produces joint products (p. 593) Ex-$200,000 wool - wool is then split up into fine, coarse, and superfine (split-off point) |
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Joint products |
Two or more products that are produced from a common input (p.553) Ex- wool is common input, two products produced from it |
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Make or buy decision |
A decision concerning whether an item should be produced internally or purchased from an outside supplier (p.542) |
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Opportunity cost |
The potential benefit that is given up when one alternative is selected over another (p.533) |
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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 (p.550) Ex-working overtime at a stitching company to increase the amount of shirts stitched, so employees in the morning can work on these. increasing the work flow and productivity |
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Relevant benefit |
A benefit that differs between alternatives in a decision. Differential revenue is a relevant benefit (p.532) |
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Relevant cost |
A difference in cost between any two alternatives. Synonyms are avoidable cost, differential cost, and incremental cost (p.532) |
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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 (p.554) |
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Special order |
A one-time order that is not considered part of the company's normal ongoing business (p.545) |
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Split-off point |
That point in the manufacturing process where some or all of the joint products can be recognized as individual products (p.556) |
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Sunk cost |
Any cost that has already been incurred and that cannot be changed by any decision made now or in the future |
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Vertical integration (vertically integrated) |
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 (p.542) Ex-producing raw materials and distributing finished goods |