Steps in a relevant variable analysis

1. Explain the difference among unit-related, batch-related, product-sustaining, and facility-sustaining costs and give an example of each.

2. What are the two attributes of a relevant variable?

3. Explain the concept of sunk cost. Are sunk costs ever relevant in short-term operating decisions? Why or why not?

1. Explain the concept of opportunity cost. Are opportunity costs ever relevant in short-term operating decisions? Why or why not?

2. Explain the term incremental. How are incremental revenues, costs, and profits used in short-term operating decisions?

3. What are the steps in a relevant variable analysis?

1. What is a special order decision? What variables are relevant in a special order decision?

2. What factors other than relevant costs and revenues must be considered when making a special order decision?

3. What is a make-or-buy decision? What are the relevant variables in a make-or-buy decision?

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