Accounting Lecture Notes 13

Accounting Lecture Notes 13 - Lecture 13: Decision making,...

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Lecture 13: Decision making, Relevant Costs and Contribution Analysis Outline the decision-making process Explain the significance of the concept of relevant costs Apply contribution analysis for decision making Evaluate shut down decisions Compare make or buy decisions Handle limiting factor decisions Accept or reject special contracts
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Assessment Quiz 3 Date 7/8 February 2008 20 multiple choice questions 1 hour Chapters 7 and 8 Understand Management Accounting Introduction to Overheads Contribution Accounting for overheads
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This week’s learning activities Read and answer questions in Accounting for Management Chapter 7 Spend 3 hours on Contribution Analysis on EQL Understand Management Accounting Attempt the Decision-making practice questions and answers Make sure you carry out all these supporting activities if you want to pass!
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Management decision-making Different levels of decisions Strategic…long term Tactical…middle term Operational…short term Selection between alternatives Aim is to improve future profitability Managers will collect cost information to help them select between options.
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 The Seven Steps of the  Decision-Making Process
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Costs for decision-making Known as “relevant” costs Future cash flows that will result from a decision. All relevant costs must be considered in making a decision.
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What is meant by relevant costing? When making a decision only take account of those revenues and costs that will change as a result of the decision If costs do not change then they are irrelevant Most Fixed Costs are irrelevant Decisions should be based on:
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Accounting Lecture Notes 13 - Lecture 13: Decision making,...

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