Managerial Accounting Chapter 8: Relevant Costs for Short Term Decisions
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Avoidable fixed costs
Fixed costs that can be eliminated as a result taking a particular course of action.
A factor that restricts production or sale of a product.
Manufacturers who make products for other companies, not for themselves.
An approach to pricing used by price-setters; cost-plus pricing begins with the product's total costs and adds the company's desired profit to determine a cost-plus price.
Having work performed overseas. Offshored work can either be performed by the company itself or by outsourcing the work to another company
A make-or-buy decision: Managers decide whether to buy a product or service or produce it in-house.
Product line income statement
An income statement that shows the operating income of each product line, as well as the company as a whole.
Expected future data that differs among alternatives.
The income resulting from subtracting only the direct fixed costs of a product line from its contribution margin. The segment margin contains no allocation of common fixed costs.
Segment margin income statement
A product line income statement that contains no allocation of common fixed costs. Only direct fixed costs that can be traced to specific product lines are subtracted from the product line's contribution margin. All common fixed costs remain unallocated, and are shown only under the company total.
A past cost that cannot be changed regardless of which future action is taken.
An approach to pricing used by price-takers; target costing begins with the revenue at market price and subtracts the company's desired profit to arrive at the target total cost.
Unavoidable fixed costs
Fixed costs that will continue to be incurred even if a particular course of action is taken.
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