Marginal Analysis (B4:M4)

Question 1

what are relevant costs?

Answer 1

costs that will change under different alternatives

Question 2

when trying to figure out which products to emphasis, which products should managers select?

Answer 2

the ones with the highest contribution margin per unit of the constraining resource

Question 3

what is the difference between explicit and implicit costs?

Answer 3

e: documented out-of-pocket costs
i: opportunity costs (not actual monetary costs)

Question 4

at capacity, what is the minimum price for a special order?

Answer 4

variable costs of current utilization + contribution margin from next best alternative

Question 5

assuming excess capacity, what is the minimum price for a special order?

Answer 5

variable costs