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19 Cards in this Set
- Front
- Back
Margin
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Net Operating Income
---------------------------------- Sales |
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Turnover
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Sales
--------------------------------------- Average Operating Assets |
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ROI
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Net Operating Income
----------------------------------- Average Operating Assets or Margin x Turnover |
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Cost Center
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The manager of a cost center has control over costs, but not over revenue or investments.
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Profit Center
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The manager of a profit center has control over both costs and revenue, but not over investments.
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Investment Center
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The manager of an investment center has control over cost, revenue, and investments in operating assets.
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Segment
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Is a part or activity of an organization about which managers would like cost, revenue, or profit data.
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Segment Margin
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segment contribution margin - segment fixed costs
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Seller: Transfer price
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Transfer Price =or>
Variable cost per unit + Total Contribution margin on lost sales -------------------------------------------------- Number of units transferred |
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Purchaser: Transfer Price
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Transfer Price =or<
Cost of buying from outside supplier |
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Criticisms of ROI
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*Managers may not know how to increase.
*Manager may inherit committed costs. *Manager may reject opportunities profitable for the entire company. |
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Avoidable Cost
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Cost that can be eliminated in whole or in part by choosing on alternative over another.
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Sunk Cost
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Is a cost that has already been incurred and cannot be avoided.
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Differential Cost
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Same as avoidable cost, incremental or relevant cost.
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Special Order
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Is a one-time order that is not considered part of the company's normal, ongoing business.
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Constraint
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A limited resource of some type restricts the company's ability to satisfy demand.
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Bottleneck
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The machine or process that is limiting overall output.
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Residual Income
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NOI-(AOI x Min. Req. Rate of Return)
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Target Cost
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Anticipated selling price - Desired Profit
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