B4-M4 Marginal Analysis Flashcards
what is a minimum cost per unit of a special order assuming available capacity?
Variable cost per unit
Variable cost of current utilization + contribution margin from the next best alternative
what is opportunity cost?
the opportunity cost is the next best use of productive capacity
the maximum benefit foregone by using a scarce resource
what is sunk cost?
costs incurred in the past that will not change as a result of any decision made in the future. These costs are considered irrelevant in marginal decisions
ex: R&D cost
what is incremental (marginal) cost?
are the additional costs incurred to produce an additional amount of product above and beyond current production levels
which cost is not relevant in situations when management must decide on accepting or rejecting one-time-only special orders, and where there is sufficient idle capacity?
Absorption cost