Question

HELP! VOCAB

Benefit foregone by choosing a particular course of action Often calculated as a percentage return on investment in assets Costs that have been incurred in the past and can’t be changed If incremental revenue from processing exceeds the extra cost of processing further Not relevant when there is excess capacity Used by price setters Their products and services are not unique or branded Incurred only if the product line is retained Their products and services are unique or have little competition Have work performed overseas If the fixed costs savings exceed the contribution margin lost from a product line or department Contribution margin of a product line minus direct fixed costs Starts with the amount customers are willing to pay and subtracts the company’s desired profit 12345678910111213141516 Restrict the amount of product that can be manufactured or sold 12345678910111213141516 Contract an outside company to produce a product or perform a service 12345678910111213141516 Looks at how operating income will be different under each alternative

1. Incremental analysis 2. Sunk costs 3. Price takers 4. Price setters 5. Cost-plus pricing 6. Target costing 7. Desired profit 8. Fixed costs 9. Avoidable fixed costs 10. Decide to discontinue 11. constraints 12. Outsourcing 13. Offshoring 14. Opportunity cost 15. Process further 16. Segment margin

Answer 1

1	Incremental analysis	Looks at how operating income will be different under each alternative
2	Sunk costs	Costs that have been incurred in the past and can’t be changed
3	Price takers	Their products and services are not unique or branded
4	Price setters	Their products and services are unique or have little competition
5	Cost-plus pricing	Used by price setters
6	Target costing	Starts with the amount customers are willing to pay and subtracts the company’s desired profit
7	Desired profit	Often calculated as a percentage return on investment in assets
8	Fixed costs	Not relevant when there is excess capacity
9	Avoidable fixed costs	Incurred only if the product line is retained
10	Decide to discontinue	If the fixed costs savings exceed the contribution margin lost from a product line or department
11	Constraints	Restrict the amount of product that can be manufactured or sold
12	Outsourcing	Contract an outside company to produce a product or perform a service
13	Offshoring	Have work performed overseas
14	Opportunity cost	Benefit foregone by choosing a particular course of action
15	Process further	If incremental revenue from processing exceeds the extra cost of processing further
16	Segment margin	Contribution margin of a product line minus direct fixed costs