ACCT 2101 Chapter : Chapter 7 Notes WLP
Document Summary
Incremental analysis decisions involve a choice among alternative courses of action: identify the decision alternatives. Critical step if left off in initial stage, you won"t look at it later: identify the probable effects of those decisions on future earnings (cost benefit) Qualitative issues must always be considered in any decision. Opportunity costs the forgone benefit (lost opportunity) that occurs from choosing one alternative over another. Capacity a measure of the limit placed on a specific resource: idle (excess) unused part of the resource. Capacity = total # of units you can make. 100% full capacity: special order or accept order at a special price one time decision only. No repeating: always consider capacity first, only consider relevant costs. Fixed only relevant if they change: consider if you cannibalize current sales, qualitative issue could impact long term pricing decisions. Always convert from unit fc to total fc.
