ACC 406 Study Guide - Unit, Meat Packing Industry, Longrun
5 Nov 2013
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Sell at the split off point or process further. Maria morales, a ca, employed by a large accounting firm at 60,000 per year. She is thinking about quitting her job to have her own practice and own business. The following is a comparison of maria"s alternatives called a differential analysis: Differential/incremental cost is the difference in total cost between the two alternatives. Differential income is the difference in total income between the two alternatives. The annual difference of ,000 favours maria"s choosing independent practice, however independent practice has an opportunity cost of ,000 the foregone salary. The following is a comparison of maria"s alternatives with focus on opportunity cost: Opportunity cost is the maximum foregone benefit (contribution to profit) by choosing to forego an alternative opportunity cost. Is the contribution of the best alternative that is excluded from consideration. Managers apply relevant cost analysis to a variety of make-or-buy decisions.
