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COMM-2016EL Study Guide - Final Guide: Opportunity Cost

Commerce and Administration
Course Code
Kayla Levesque
Study Guide

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Opportunity, Differential and Sunk Costs
Opportunity Cost- The profit rejected by using limited resources for a particular
Differential Cost- The difference in total cost between alternatives.
Incremental costs is the same concept, it is the added cost. On the other hand
differential savings or incremental savings is the reduced costs, hence money saved.
Sunk Cost- A cost that has already been incurred and, therefore is irrelevant to the
decision making process.
Joint Products
Joint Products- two or more manufactured products that are not identifiable as
separate products until their split off point.
Split off point- the point in manufacturing in which joint products can be
individually identifiable.
Separable cost- any costs beyond the split off point in a joint product production
Joint costs- is a cost of a single process that yields multiple products
Make or Buy
What manufacturing costs are relevant?
Costs that directly impact the production of a product
What fixed costs are relevant?
Costs that will change amongst alternatives?
Avoidable fixed costs
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