Chapter 24 Differential Analysis and Product Pricing Flashcards
The area of accounting concerned with the effect of alternative courses of action on revenues and costs
Differential Analysis
The area of accounting concerned with the effect of alternative courses of action on revenues and costs
incremental analysis
The amount of increase or decrease in revenue expected from a particular course of action as compared with an alternative
Differential Revenue
The amount of increase or decrease in cost expected from a particular course of action compared with an alternative
Differential Cost
The difference between the differential revenue and the differential costs
Differential income (loss)
A cost that has been incurred in the past, cannot be recouped, and is not affected by subsequent decisions
Sunk costs
Change in Revenue - Change in Costs
Lease/Sell Equipment
The amount of revenue that is foregone from an alternative use of an asset, such as cash
Opportunity cost
A concept used in applying the cost-plus approach to product pricing in which only the costs of manufacturing the product, termed the product cost, are included in the cost amount to which the markup is added
Product cost concept
A method of setting prices that combines market-based pricing with a cost-reduction emphasis. The target cost is determined by subtracting a desired profit from the expected selling price, determined from demand-based or competition-based concepts
Target costing
A condition that occurs when product demand exceeds production capacity
Production bottleneck
A manufacturing strategy that focuses on reducing the influence of bottlenecks (constraints) on production processes
Theory of constraints
