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Avoidable cost
A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with relevant cost. (p. 528)
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Bottleneck
A machine or some other part of a process that limits the total output of the entire system. (p. 544)
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Constraint
A limitation under which a company must operate, such as limited available machine time or raw materials, that restricts the company's ability to satisfy demand. (p. 544)
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Joint costs
Costs that are incurred up to the split-off point in a process that produces joint products. (p. 549)
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Joint products
Two or more products that are produced from a common input. (p. 549)
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Make or buy decision
A decision concerning whether an item should be produced internally or purchased from an outside supplier. (p. 539)
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Relaxing (or elevating) the constraint
An action that increases the amount of a constrained resource. Equivalently, an action that increases the capacity of the bottleneck. (p. 546)
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Relevant benefit
A benefit that differs between alternatives in a decision. Synonyms are differential benefit and incremental benefit. (p. 528)
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Relevant cost
A cost that differs between alternatives in a decision. Synonyms are avoidable cost, differential cost, and incremental cost. (p. 528)
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Sell or process further decision
A decision as to whether a joint product should be sold at the split-off point or sold after further processing. (p. 551)
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Special order
A one-time order that is not considered part of the company's normal ongoing business. (p. 542)
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Split-off point
That point in the manufacturing process where some or all of the joint products can be recognized as individual products. (p. 549)
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Sunk cost
Any cost that has already been incurred and that cannot be changed by any decision made now or in the future. (p. 528)
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Vertical integration
The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service. (p. 539)
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