Chapter 11

A formal method of making a choice that often involves both quantitative and qualitative analyses.

Expected future costs that differ among the alternative courses of action being considered.

Expectured future revenues that differ among the alternative courses of action being considered.

Past costs, they are unavoidable and cannot be changed no matter what action is taken.

Outcomes that are measured in numerical terms. Examples include cost of direct materials, direct manufacturing labor, and marketing.

Outcomes that are difficult to measure accurately in numerical terms. Examples include employee morale.

Orders that have no long-run implications.

The sum of all costs (variable and fixed) in a particular business function of the value chain, such as manufacturing costs or marketing costs.

The sum of all variable and fixed costs in all business functions of the value chain (R&D, design, production, marketing, distribution, and customer service).

Purchasing goods and services from outside vendors rather than producing the same goods or providing the same services within an organization.

Producing goods or providing services within an organization rather than purchasing goods and services from outside vendors.

Decisions about whether a producer of goods or services will insource or outsource.

The additional total cost incurred for an activity.

The difference in total (relevant) cost between two alternatives.

The additional total revenue from an activity.

The difference in total revenue between two alternatives.

Is the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use.

The decisions managers make about which products to sell and in what quantities. These decisions usually have only a short-run focus because they typically arise in the context of capacity constraints that can be relaxed in the long-run.

Describes methods to maximize operating income when faced with some bottleneck and some nonbottleneck operations.

Equals revenues minus the direct material cost of the goods sold.

Original cost minus accumulated depreciation.