CHAPTER 13 SHORT-RUN DECISION MAKING: RELEVaNT COSTING 1 DISCUSSION QUESTIONS 1. Tactical decisions are short run in nature; they involve choosing among alternatives with an immediate or limited end in view. Strategic decisions involve selecting strategies that yield a long-term competitive advantage. 2. Depreciation is an allocation of a sunk cost. This cost is a past cost and will never differ across alternatives. 3. The salary of the supervisor of an assembly line with excess capacity
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for an order for 2‚500 units of GX1. The company only makes GX1 to order and currently has no other orders in process. The production requirements for GX1 are as follows: Materials: Three types of material are used in production: Amount Cost Resale Current used per unit price value price to buy Material A 12kg £2.50 £1.00 £2.75 Material B 4kg £7.00 £5.50 £8.50 Material C 6kg - £6.50 - Material A is used extensively throughout the company’s range of products
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Relevant Costs Defined Relevant costs possess two characteristics: (1) They are future costs and (2) They differ across alternatives. All pending decisions relate to the future; accordingly‚ only future costs can be relevant to decisions. However‚ to be relevant‚ a cost must not only be a future cost but must also differ from one alternative to another. If a future cost is the same for more than one alternative‚ then it has no effect on the decision. Such a cost is irrelevant. The
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CHAPTER 2: RELEVANT REVENUES AND COSTS The primary goal of a firm is to maximize profits. This implies‚ of course‚ that each decision a manager makes is consistent with that goal. Although managers are expected to rely on internally-produced reports‚ such as balance sheets and income statements‚ to help them make decisions‚ most of the information that appears on these statements is period-based rather than decision-based. A balance sheet shows the sum total of a firm’s assets and liabilities
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Relevant Experience Statement I love children. It’s amazing teaching them and working with them‚ but I have to say that the ages of 1-3 years old are my favorite range. Children with special needs are part of my daily life‚ as I have one‚ and that is what makes me want to work in early intervention. I have worked in a daycare setting with the babies and toddlers‚ and I love everything about it. Babies and toddlers learn through play. When you play with baby dolls‚ read books to them‚ play with simple
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1. The cost of a computer system installed last year is an example of: (Points: 2) a sunk cost a relevant cost a differential cost an avoidable cost 2. In evaluating different alternatives‚ it is useful to concentrate on: (Points: 2) variable costs fixed costs total costs relevant costs 3. Relevant costs in a make-or-buy decision of a part include: (Points: 2) setup overhead costs for the manufacture of the
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revenues and it is estimated that the promotional elasticity of demand is 0.1. It is also estimated that variable costs per student are Rs.60‚000. Questions 1. Why might Mr. Chatterjee’s estimates of the relevant price elasticity not be very reliable? 2. Estimate the effect of the proposed fee increase on the number of Indian student and revenues from these students‚ stating any relevant assumptions. 3. Estimate the effect of the proposed fee increase on the total number of students and on total
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Relevant Costs and Decision Making 4.16 A. The fixed overhead cost will be the same regardless of which method Regina Corp goes. Based on the analysis of Yoklic‚ they will incur the additional cost of $6 per unit by purchasing the subassemblies versus manufacturing them. B. The $50‚000 that is saved by eliminating the fixed overhead reduces the cost for outsourcing. This will give Yoklic an overall $20‚000 savings for 5‚000 units by purchasing externally versus manufacturing internally
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ACCOUNTING CO-ORDINATOR: P Gopaul Siphesihle Secondary PRODUCTION COST STATEMENTS LO2: AS 2: MANAGERIAL ACCOUNTING Prepare ‚ present‚ analyse and report on cost information for a manufacturing Enterprise by compiling a production cost statement. 1. The financial statements of manufacturing enterprises The financial statements of the manufacturing enterprise differs very little from those of the merchandising enterprise. Account titles on the balance sheet of the manufacturer are similar to those
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Chapter 13 Relevant Costs for Decision Making Solutions to Questions 13-1 A relevant cost is a cost that differs in total between the alternatives in a decision. 13-2 An incremental cost (or benefit) is the change in cost (or benefit) that will result from some proposed action. An opportunity cost is the benefit that is lost or sacrificed when rejecting some course of action. A sunk cost is a cost that has already been incurred and that cannot be changed by any future decision. 13-3 No. Variable
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