Chapter 4 Flashcards
Differential analysis
Process of estimating revenues and costs of alternative actions available to decision-makers and of comparing these estimates to the status quo
Short run
Decision horizons over which capacity will be unchanged, usually one year
Differential costs
Change in response to alternative courses of action
Sunk costs
Incurred in the past and cannot be changed regardless of the decision made
Full cost
The sum of all fixed and variable costs of manufacturing and selling a unit
Special order
Order that will not affect other sales and is usually a short-run occurrence
Product-life cycle
Time from initial research and development to the time to which support to the customer ends
Target price
The estimated price for a product or service that potential customers will be willing to pay
Target cost
The estimated long-run cost of a product or service whose sale enables the company to achieve targeted profit
Predatory pricing
The practice of setting the selling price of a product at a low price with the intent of driving competitors out of the market or creating a barrier to entry for new competitors
Dumping
When a company exports its product to consumers in another country at an export price that is below the domestic price
Price discrimination
The practice of selling identical goods or services to different customers at different prices
Peak-load pricing
The practice of setting prices highest when the quantity demanded for the product approaches the physical capacity to produce it
Price fixing
The agreement among business competitors to set prices at a particular level
Make-or-buy decisions
Any decision by a company to acquire goods or services internally or externally
