Chapter 16 – Short-Term Decision Making

These flashcards cover key vocabulary and concepts related to short-term decision-making in business as discussed in Chapter 16.

Relevant Costs

Future costs or revenues that differ among competing decision alternatives.

Irrelevant Costs

Future costs or revenues that do NOT differ among competing decision alternatives.

Sunk Costs

Costs that result from past decisions that cannot be changed and are NEVER relevant.

Opportunity Costs

A forgone benefit as a result of rejecting one alternative in favor of another.

Differential Analysis

An approach to the analysis of relevant costs that focuses on costs that differ between alternative actions.

Special Orders

Occur when a customer wants to buy merchandise or obtain services at a price less than prices charged to other customers.

Outsourcing

The procurement of services, products, components from an external source.

Contribution Margin

The difference between the selling price per unit and the variable cost per unit.

Product Mix Decisions

Decisions on how to best use limited resources to accomplish organizational goals.

Capacity Considerations

Factors that influence whether a special order can be fulfilled without exceeding production capacity.