Relevant Costs and Revenues

A set of flashcards to help review key concepts on relevant costs and revenues for decision-making in managerial accounting.

Relevant Cost Analysis

A process allowing managers to compare one alternative to another based on cost and revenue differences.

Contribution Margin

The difference between sales revenue and variable costs, reflecting the amount available to cover fixed costs and generate profit.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent and salaries.

Operating Profit

The profit realized from business operations after deducting operating expenses.

Sunk Cost

A cost that has already been incurred and cannot be changed by future decisions.

Special Orders

Requests for products at a price different from the usual sales price, often evaluated in terms of contribution margin impacts.

Idle Capacity

Unutilized production capability that can be used to accept additional orders without incurring extra fixed costs.

Make or Buy Decision

The choice between manufacturing a product internally or purchasing it from an outside supplier based on costs.

Incremental Profit

The additional profit gained by accepting a special order or making a different business decision.

Joint Products

Products that are produced simultaneously from the same raw materials in a joint process.