Marginal Analysis

Question 1

Presumed Excess capacity

Answer 1

price > VC/unit

Question 2

Presumed Full Capacity

Answer 2

Price > VC/unit + OC/unit

Question 3

OC/Unit

Answer 3

CM Give up/ units in special order

Question 4

Make VS Buy Decision Rule

Answer 4

make if relevant costs < outside purchase price

Question 5

Make/Buy Excess Capacity

Answer 5

Relevant Costs = Avoidable costs

Question 6

Make/Buy No excess capacity

Answer 6

Relevant costs = available cost + oC

Question 7

Sell or Process Further Decision Rule

Answer 7

Process further if incremental revenue > incremental cost

Question 8

Lost CM

Answer 8

cost to give up

Question 9

Keep or Drop Segment

Answer 9

Keep if lost CM > avoided fixed costs

Drop if lost CM < benefit