Acct 102 Chap 5

Acct 102 Chap 5 - Acct 102 Chap 5 Avoidable costs are...

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Acct 102 – Chap 5 Avoidable costs are potential future costs an organization can circumvent by choosing a particular course of action. To be avoidable the cost must differ between alternatives. Batch-level costs are associated with producing a batch of products. Batch-level activities relate to the production of groups of products, the costs of which are fixed regardless of the number of units produced in the batch. They are best allocated using cost drivers that measure activity consumption. Differential costs differ among alternative business opportunities and are usually relevant for decision-making. Differential Revenue is revenue that differs among alternative business opportunities; usually relevant for decision making. Equipment replacement decisions consider whether existing equipment should be replaced with newer equipment based on identification and comparison of the avoidable costs of the old and new equipment to determine which equipment is more profitable to operate. Facility-level costs
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