Ch. 20 Incremental Analysis

Incremental analysis

The process of identifying the financial data that change under alternative courses of action.

Joint costs

For joint products, all costs incurred prior to the point at which the two products are separately identifiable (known as the split-off point).

Joint products

Multiple end-products produced from a single raw material and a common production process.

Opportunity cost

The potential benefit that is lost when one course of action is chosen rather than an alternative course of action.

Relevant costs and revenues

Those costs and revenues that differ across alternatives.

Sunk cost

A cost incurred in the past that cannot be changed or avoided by any present or future decision.