ADM 2341 Lecture Notes - Lecture 17: Accounting, Total Absorption Costing, Limiting Factor

• School: University of Ottawa
• Department: Administration
• Course: ADM 2341
• Professor: Abdenour Slaouti

Document Summary

> key is to focus on the relevant costs the data that change under the alternative courses of action. > net income may actually decrease if the. Fixed expenses will increase to ,000 (,000 1 ,000) in the. Pro line and to ,000 (,000 1 ,000) in the master line. > the loss in net income is attributable to the. Champ line"s contribution margin (,000), which the company will not realize if it discontinues the segment. Assume the same facts as above, except now assume that ,000 of the xed costs attributed to the champ line can be eliminated if the line is discontinued. Illustration 7-20 presents the incremental analysis based on this revised assumption. Allocate limited resources: e. g, bilodeau company manufactures deluxe and standard pen-and- pencil sets. The limiting resource is machine capacity, which is 3,600 hours per month. >however, note that the standard sets take fewer machine hours to produce than the deluxe sets.