Cost Accounting and Pricing Strategies: Relevant vs Irrelevant Costs and Approaches, Quizzes of Management Accounting

Download Cost Accounting and Pricing Strategies: Relevant vs Irrelevant Costs and Approaches and more Quizzes Management Accounting in PDF only on Docsity! TERM 1 Relevant costs DEFINITION 1 Are incremental, differential, marginal and therefore avoidable TERM 2 Irrelevant costs DEFINITION 2 Do not differ between alternatives and are unavoidableExamples: Sunk costs Future costs (that are unavoidable and don't differ across alternatives) TERM 3 Differential cost approach DEFINITION 3 Only the relevant costs are considered TERM 4 Total cost approach DEFINITION 4 All the revenue and costs are displayed in the income statement, then the difference in NOI between two alternatives is compared TERM 5 Sunk costs DEFINITION 5 Costs that have been incurred in the past and can't be changed TERM 6 Target costing DEFINITION 6 The company is a price-taker No brand name, heavy competition or products lack uniqueness Market price - Desired profit = Target total cost TERM 7 Cost-plus pricing DEFINITION 7 The company is a price-setter Products are unique, brand name or there are few competitors Company decides the profit they want Total costs + Desired profit = Selling price TERM 8 Regular pricing decisions DEFINITION 8 Target costing Cost-plus pricing TERM 9 Bottleneck DEFINITION 9 A constraint that prevents an organization from satisfying demand TERM 10 Vertically integrated DEFINITION 10 When a company is involved in more than one activity in the value chain