Chapter 4 Flashcards
Differential Analysis
The process of estimating revenues and costs of
alternative actions available to decision makers, and of comparing these
estimates to the status quo
Differential Cost
With two or more alternatives, costs that differ among or
between alternatives
Sunk Costs
Costs incurred in the past that cannot be changed by present or
future decisions –>A sunk cost is NOT relevant for making decisions
Special Orders
An order that will not affect other sales and is usually a short-run
occurrence
Full Cost
the sum of all fixed and variable costs of manufacturing
and selling a unit
Target Price
The price based on customers’ perceived value for a product and the price that competitors charge
Predatory Pricing
Practice of setting price below cost with the
intent to drive competitors out of business
Dumping
Exporting a product to another country at a price below domestic price
Price Discrimination
Selling identical goods to different
customers at different prices
Peak Load Pricing
setting prices highest when the quantity
demanded for the product approaches capacity
Price Fixing
Agreement among businesses to set prices at a
particular level.
Make or Buy
Decision to make goods or services internally or purchase them externally
Add or drop
Decision to add or drop a product line or close a business unit
Product Choice
Decision on what products or services to offer (product mix)
Theory of Constraints
Focuses on revenue and cost management when faced with bottlenecks
