Lesson 4 Decision Making 英文管理会计课件 Management Accounting

Opportunity costs are not recorded in the accounting records, but are relevant to decisions
because they are a real sacrifice.
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Sunk Costs Versus Out-of-Pocket Costs
Costs that are avoidable. Future costs that differ
between alternatives.
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The Concept of Relevant Cost Information
• Will you drive or fly to Florida for spring break?
$500.
• Driving requires two days, with an overnight stay, 202c0/6u/17tting your time in Florida by two days.
The Concept of Relevant Cost Information
Florida Spring Bre a k D rive /F ly A n a lysis
Drive $ 640
160 40
100 200 -
Fly $ 640
160 40
100 500
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Costs do not differ, so they are not
relevant to decision.
Also, car insurance is not relevant to the decision as it is a past cost.
Important cost concepts for business decisions.
Differential Costs and Revenues
Differential Costs and Revenues Opportunity costs. Sunk costs. 2020/6/1O7 ut-of-pocket costs.
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2: Different types of operating decisions
Learning objective • Using Incremental Analysis in different
operating decisions.
Required reading • Chapter 11, pages 301-318
C o st M ote l Ea tin g o u t co sts K e n n e l co st C a r in su ra n ce G a so lin e Airfa re /re nta l ca r
Drive $ 640
160 40
100 200 -
Fly $ 640
160 40
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1. Special Order Decisions
The decision to accept additional business should be based on incremental costs and incremental revenues.
Incremental amounts are those that occur only if the company decides to accept the new business.
Managers must make short-run decisions, with a fixed set of resources, to react to the changing market place.
Special order decisions
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Product mix
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The Challenge of Changing Markets
Product markets can change quickly due to competitor price cuts, changing customer preferences, and introduction of new products by competitors.
Example: If you were not attending college, you could be earning $20,000 per year. Your opportunity cost of attending college for one year includes the $20,000.
Drive $ 640
160 40
100 200 -
F源自文库y $ 640
160 40
100 500
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Are the extra two days in Florida worth the $300 extra cost to fly?
Transportation costs differ between the two alternatives, so they are relevant
Differential Costs and Revenues
Costs and revenues that differ among alternatives.
Example: You have a job paying $1,500 per month in your hometown. You have a job offer in a neighboring city that pays $2,000 per month. The commuting cost to the city is $300 per month.
The Concept of Relevant Cost Information
Florida Spring Bre a k D rive /F ly A n a lysis
C o st M ote l Ea tin g o u t co sts K e n n e l co st C a r in su ra n ce G a so lin e Airfa re /re nta l ca r
to your decision
Relevant Information in Business Decisions
Information that varies among the possible courses of action being considered.
— Incremental costs and revenues —
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Sunk Costs Versus Out-of-Pocket Costs
Cost = $10,000 two years ago
Trade ?
Cost = $25,000 today
The dealer will trade for $20,000 plus your car. What amount is relevant to your decision, the $10,000 sunk cost of your car or the $20,000 out-of-pocket cash differential?
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Five-Step Decision-Making Process：
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Different types of operating decisions
We will now examine several
different types of managerial
100 500
8 days @ $80 8 days @ $20 8 days @ $5
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The Concept of Relevant Cost Information
Florida Spring Bre a k D rive /F ly A n a lysis
C o st M ote l Ea tin g o u t co sts K e n n e l co st C a r in su ra n ce G a so lin e Airfa re /re nta l ca r
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Differential revenue is: $2,000 – $1,500 = $500
Differential cost is: $300
Opportunity Cost
The benefit that could have been attained by pursuing an alternative course of action.
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Special Order Decisions
JamCo currently sells 100,000 units of its
product. The company has revenue and
decisions.
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Accepting Additional Business
The decision to accept additional business should be based on incremental costs and incremental revenues. Incremental amounts are those that occur if the company decides to accept the new business.
Required reading • Chapter 11, pages 299-303
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5
Relevant Costs
Costs that are applicable to a particular decision.
Costs that should have a bearing on which alternative a manager selects.
All costs incurred in the past that cannot be changed by any decision made now or in the future.
Sunk costs should not be considered in decisions.
Example: You bought an automobile that cost $10,000 two years ago. The $10,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the $10,000 cost.
• You have gathered the following information to help you with the decision.
Motel cost is $80 per night. Meal cost is $20 per day. Your car insurance is $100 per month. Kennel cost for your dog is $5 per day. Round-trip cost of gasoline for your car is $200. Round-trip airfare and rental car for a week is
decisions
Make or buy decisions
Joint product decisions
1: Relevant cost
Learning objective • Distinguish relevant from irrelevant
information in decisions situations.