Managerial Accounting by James Jiambalvo: The Use of Cost Information in Management Decision Making
Managerial Accounting by James Jiambalvo: The Use of Cost Information in Management Decision Making
Chapter 6:
The Use of Cost Information in Management Decision Making.
Slides Prepared by: Scott Peterson Northern State University
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
Incremental Analysis
The solution to all business problems involves incremental analysisthe analysis of incremental revenues and incremental expenses. Incremental revenue: the additional revenue received as a result of selecting one decision over another. Incremental cost: the additional cost incurred as a result of selecting one alternative over another. Related Learning Objectives:
1.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
The Split-Off-Point
Related Learning Objectives:
1.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
4.
Explain the role of incremental analysis (analysis of incremental costs and revenues) in management decisions. Define sunk cost, avoidable cost, and opportunity cost and understand how to use these concepts in analyzing decisions. Analyze decisions involving joint costs. Discuss the importance of qualitative consideration in management decisions.
2.
3.
Calculate a price based on marking up cost. Perform incremental analysis for a special order. Explain how to consider demand in setting prices.
Cost-Plus Pricing
Perhaps because of the difficulty of estimating demand functions, many companies use so-called cost-plus pricing. Here, the firm begins with an estimate of cost and then adds a markup to arrive at the price which allows for a reasonable level of profit. This method is simple, but limited. Related Learning Objectives:
1.
2.
3.
Calculate a price based on marking up cost. Perform incremental analysis for a special order. Explain how to consider demand in setting prices.
2.
3.
Calculate a price based on marking up cost. Perform incremental analysis for a special order. Explain how to consider demand in setting prices.
2.
3.
Calculate a price based on marking up cost. Perform incremental analysis for a special order. Explain how to consider demand in setting prices.
Copyright
2001 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.