ADMS 2510 Lecture Notes - Management Accounting, Sunk Costs, Contribution Margin

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ADMS 2510 Full Course Notes
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ADMS 2510 Full Course Notes
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Relevant cost: a cost that differs among the alternatives in a particular decision and will be incurred in the future. In managerial accounting, this term is synonymous with avoidable cost and differential cost. Avoidable cost: any cost that can be eliminated (in whole or in part) by choosing one alternative over another in a decision-making situation. In managerial accounting, this term is synonymous with relevant cost and differential cost. In managerial accounting, the terms avoidable cost, differential cost, incremental cost, and relevant cost are often used interchangeably. Keep if cm lost (all products/segments) > fixed costs avoided + cm gained (other products/segments) Drop if cm lost (all products/segments) < fixed costs avoided + cm gained (other products/segments) Vertical integration: the involvement by a single company in more than one of the steps of the value chain from production of basic raw materials to the manufacture and distribution of a finished product.

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