Beruflich Dokumente
Kultur Dokumente
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Learning Objective 1
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Decision Making
Decision making involves a choice between alternative courses of action. Examples are: What products to produce How to produce them How to sell them What prices to charge Where to buy raw materials When to replace equipment How to allocate scarce resources Where to expand production capacity
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Step 2. Feedback
Make Predictions
Step 3.
Choose an Alternative
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Learning Objective 2 Differentiate relevant from irrelevant costs and revenues in decision situations.
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Financial
Nonfinancial
Qualitative factors
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Marketing costs per unit are $7 ($5 of which is variable). What is the full cost per towel?
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A hotel in San Juan has offered to buy 5,000 towels from Bismark Co. at $11.50/towel for a total of $57,500. No marketing costs will be incurred.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Should Bismark Co. manufacture the part or buy it from Towson Co.?
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Bismark Co. plans to continue to produce 150,000 next year at the same variable manufacturing costs per unit as this year. Fixed costs are expected to remain the same as this year.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Cost to buy: (150,000 $0.55) $82,500 Bismark Co. will save $6,000 by making the part.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Learning Objective 5 Explain the opportunity-cost concept and why it is used in decision making.
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Buy Part #2 and make Part #3: $82,500 $18,000 = Make Part #2:
$64,500 $76,500
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$81,000
$ 2,430 $83,470
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Learning Objective 6 Know how to choose which products to produce when there are capacity constraints.
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What is the contribution of each product per machine-hour? Product #2: $1.70 7 = $0.24 Product #3: $0.60 2 = $0.30
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Learning Objective 7
Discuss what managers must consider when adding or discontinuing customers and segments. Exercise 7-3
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Learning Objective 8 Explain why the book value of equipment is irrelevant in equipment-replacement decisions.
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Learning Objective 9
Explain how conflicts can arise between the decision model used by a manager and the performance evaluation model used to evaluate the manager.
2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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End of Chapter 11
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