CH 25 Flashcards
What does Short-Term Decision Making Involves?
use of existing capacity and periods of one year or less
Opportunity Cost
largest benefit forgone because of choosing a particular alternative
Sunk Costs
Costs incurred in the past
Differential analysis
analyzes differential revenues and costs to find the differential impact on profit of two alternative courses of action
Differential revenue
the amount of increase or decrease in revenue that is expected from a course of action compared to an alternative.
Differential cost
the amount of increase or decrease in cost that is expected from a course of action as compared to an alternative.
Differential profit (loss)
the difference between the differential revenue and differential costs.
A production bottleneck (or constraint)
a point in the manufacturing process where the demand for the company’s product exceeds the ability to produce the product.
The theory of constraints (TOC)
a manufacturing strategy that focuses on reducing the influence of bottlenecks on production processes.
