Lovell should drop the digital watch segment only if its profit would increase. This would only
happen if the fixed cost savings exceed the lost contribution margin.
Lets look at this solution.
An opportunity cost is the benefit that is foregone as a result of pursuing some course of action.
Opportunity costs are not actual dollar outlays and are not recorded in the formal accounts of an
How would this concept pote
Utilization of a Constrained Resource
Machine A1 is the constrained resource and is being used at 100% of its capacity.
There is excess capacity on all other machines.
Machine A1 has a capacity of 2,400 minutes per week.
Should Ensign focus its efforts on
Glacier Peak Outfitters has the following direct materials standard for the fiberfill in its
0.1 kg. of fiberfill per parka at $5.00 per kg.
Last month 210 kgs. of fiberfill were purchased and used to make 2
Differential Analysis: The Key to Decision Making
Cost Concepts for Decision Making
A relevant cost is a cost that differs between alternatives.
Identifying Relevant Costs
An avoidable cost can be eliminated, in whole or in part, by choosin
Glacier Peak Outfitters has the following direct labor standard for its mountain parka.
1.2 standard hours per parka at $10.00 per hour
Last month, employees actually worked 2,500 hours at a total labor cost of $26,250 to make