Chapter 12

Chapter 12 - Chapter 12 Short-Term Tactical Decision Making...

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    Chapter 12 Short-Term Tactical  Decision Making
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    Introduction How does a manager decide: The selling price of a product? Whether to accept a special order? Whether to add or drop a product? Which products to put on the shelves? Whether to hire an employee or outsource? Whether to make or buy a product?
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      Chapter presents a convenient model for analyzing  a variety of common short-run decisions   1 2 Define the problem Identify the alternatives Identify the costs and benefits associated with  each feasible alternative Total the relevant costs and benefits for each  alternative Relevant costs are future costs that differ across  alternatives Assess the qualitative factors Select alternative with the greatest benefit
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4 Relevant Costs Can consist of both variable and fixed costs Additional fixed costs associated with an alternative  are relevant Changes in supply and demand for resources  must be considered Costs which fluctuate with changes in supply and  demand across alternatives are relevant costs Also known as differential or incremental costs Practical interpretation All costs that are different
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    The Matter of Opportunity Cost The economic benefits that are foregone as a result of pursuing some course of action Do not represent actual dollar outlays and are not recorded in the accounts of an organization
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    Profit Planning Make or Buy Special Orders Sell or Process Further Limited Resources Any combination . . . . Decision Scenarios
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    Special Order Decisions Short-run decisions Excess production capacity Relevant costs associated with each                                   specific special order
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    Special Orders BowTie, Inc. receives a one-time order that is not  considered part of its normal ongoing business. BowTie, Inc. makes a single product with a unit variable  cost of $8.  Normal selling price is $20 per unit. A foreign distributor offers to purchase 3,000 units for 
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This note was uploaded on 05/09/2008 for the course ACC 240 taught by Professor Karengeiger during the Fall '07 term at ASU.

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Chapter 12 - Chapter 12 Short-Term Tactical Decision Making...

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