Ch 12 Flashcards
Relevant benefits
Benefits that differ btw alternatives
Relevant costs
Costs that differ btw alternatives in a decision
Avoidable cost
Cost that can be eliminated by choosing
one alternative over another
Sunk cost
Cost that has already been incurred and
Cannot be avoided regardless of what the
manager decides
Vertically integrated
When a company is involved in more than one activity
In the entire value chain
Value chain
All activities from development, production to,
After sales service
Make or buy decision
Decision to carry out one of the value chain activities
Internally rather than buy externally from supplier
Special order
One-time order not considered part of the company’s
Normal ongoing business
Constraint
When limited resource of some type restricts company’s
Ability to satisfy demand
Bottleneck
Machine or process limiting overall output, the constraint
Relaxing AKA Elevating the constraint
Manager increases the capacity of bottleneck
Joint products
Two or more products produced from a common input
Split-off point
Point in manufacturing process where joint products
Can be recognized as separate products
Joint cost
Costs incurred up to the split off point
Sell or process further decision
Decision as to whether a joint product should
Be sold at split-off point or sold after further processing
