COMM 112 Chapter Notes - Chapter 12: Management Accounting, Contribution Margin, Sunk Costs
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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. 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. Make or buy decision: a decision as to whether an item should be produced internally or purchased from an outside supplier. Special order: a one-ti(cid:373)e order that is (cid:374)ot (cid:272)o(cid:374)sidered part of the (cid:272)o(cid:373)pa(cid:374)y"s (cid:374)or(cid:373)al o(cid:374)goi(cid:374)g (cid:271)usi(cid:374)ess. Joint products: two or more items that are produced from a common input.
