Understand the concept of relevant revenues and costs. What makes a revenue or cost relevant?

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Know and understand the following terms:

Avoidable costs _______________________________________________________________

Opportunity costs _____________________________________________________________

Relevant Costs ________________________________________________________________

Differential Costs ______________________________________________________________

Sunk Costs ___________________________________________________________________

Differential Revenues ___________________________________________________________

Understand the concept of Cost Hierarchy and Cost Avoidance. What are the different cost hierarchies and when are they eliminated?

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Review examples of costs in the above 4 categories that we covered in class or in problems.

Understand the difference between Qualitative and Quantitative information both are relevant to decision making.

Special Order Decisions

What is a Special Order Decision? ____________________________________________

Review how to determine relevant (differential) revenues and relevant (differential) costs to make the decision whether or not to take a Special Order.

Outsourcing Decisions

What is an Outsourcing Decision? ____________________________________________

What level costs generally are relevant to a decision to outsource?

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What is vertical integration?

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How does outsourcing impact vertical integration? ____________________________________

Asset Replacement Decisions

What do Asset Replacement Decisions involve? ______________________________________________________________________________

What are the relevant cost levels involved in an asset replacement decision?

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