tailieunhanh - Lecture Accounting for business: A guide for non-accountants (2/e) – Chapter 8: Short-term decision-making techniques

After you have mastered the material in this chapter, you will be able to: Explain the terms incremental costs and incremental benefits, describe situations where incremental analysis may be used to assist management, distinguish between relevant and irrelevant information used in decision making,. | Chapter 8 Short-term decision making techniques 8- Objectives Explain the terms incremental costs and incremental benefits. Describe situations where incremental analysis may be used to assist management. Distinguish between relevant and irrelevant information used in decision making. 8- Objectives (continued) Apply incremental analysis to two (2) of the following situations: make or buy a component accept a special order add a new product close a department process a product further, or sell the product as is. 8- Objectives (continued) Explain how costs and profits respond to changes in sales volume. Use a cost-volume-profit analysis as a tool for management. Define contribution margin. Calculate the contribution margin per unit and the contribution margin as a ratio. 8- Objectives (continued) Calculate a break-even point by use of a formula and by use of a graph. Calculate the sales required to earn a desired level of profit (in dollars and units). Apply a cost-volume-profit analysis to practical situations. 8- Incremental benefits and incremental costs To assist decision makers by providing information?? Incremental benefits the difference between revenues of different alternatives. Incremental costs the difference between costs of the alternatives 8- Incremental benefits and incremental costs (continued) Managers will aim to choose the alternative which derives the greatest benefit. highest revenue lowest cost. 8- Incremental analysis Incremental analysis Making an informed decision when faced with alternatives. Examples: to make or buy a component to accept a special order to add a new product line to close a department to process a product further, or sell the product as is. 8- Relevant and irrelevant information Management needs information to make decisions, the more information the better. The accountant needs to identify all relevant information to assist decision makers. Relevant data is data that will alter the result | Chapter 8 Short-term decision making techniques 8- Objectives Explain the terms incremental costs and incremental benefits. Describe situations where incremental analysis may be used to assist management. Distinguish between relevant and irrelevant information used in decision making. 8- Objectives (continued) Apply incremental analysis to two (2) of the following situations: make or buy a component accept a special order add a new product close a department process a product further, or sell the product as is. 8- Objectives (continued) Explain how costs and profits respond to changes in sales volume. Use a cost-volume-profit analysis as a tool for management. Define contribution margin. Calculate the contribution margin per unit and the contribution margin as a ratio. 8- Objectives (continued) Calculate a break-even point by use of a formula and by use of a graph. Calculate the sales required to earn a desired level of profit (in dollars and units). Apply a .