This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: = expenses that will continue if product line is dropped Avoidable expenses = those that disappear after product line is dropped o Usually all VC are avoidable Take out the unavoidable expenses o Then re-calculate the profit If positive dont eliminate If negative drop product line Joint Products: Sell or Process Further Split-off point when joint products are identifiable as separate products o Should product be sold at split off point or process further? Selling value after further processing- Selling value at split off point Incremental revenue from further processing Less: incremental processing cost Net benefit from further processing Positive Negative Process further Sell at split off point Theory of Constraint Need to find constraint (bottleneck) in production and relax it o Ways to relax Outsource Overtime work Train employees and shift them to constraint Eliminate non-value added activity Common...
View Full Document