ProductPlanningDecisionsACC200 2009

ProductPlanningDecisionsACC200 2009 - Net Income $1,000 350...

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Chapter Objectives – Relevant Costs and Product Planning Decisions u Analyze the pricing of a special order u Analyze a decision involving the outsourcing of labor or making or buying a component u Analyze a decision dealing with dropping a product u Analyze a decision dealing with limited resources u Analyze a decision dealing with selling a product at the split-off point or processing it further
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Management Decision Cycle FINANCING DECISIONS INVESTING DECISIONS OPERATING DECISIONS FUNDING OPERATING PROFIT INVESTMENTS
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Product Planning Decisions u Special orders u Hire an employee or outsource u Make or buy a product u Add or drop a product u Resource utilization u Sell or process further
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Income Statements TRADITIONAL CONTRIBUTION MARGIN Sales Less: Cost of Goods Sold: Variable Costs Fixed Costs Total Cost of Goods Sold Gross Profit Less: Variable Costs Fixed Costs Net Income Sales Less: Variable Costs: Manuf. Costs Total Variable Costs Contribution Margin Less: Fixed Costs: Manuf. Costs Total Fixed Costs
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Unformatted text preview: Net Income $1,000 350 150 $ 500 $ 500 $ 50 250 $ 300 $ 200 $ 1,000 $350 50 $400 $600 $150 250 $400 $200 Special Order Decision u Short-run decisions u Excess production capacity u Relevant costs associated with each specific special order Variable costs Opportunity costs u Qualitative factors u Price of a special order Cover additional variable costs plus opportunity costs Outsourcing Decision u Impact of taxes u Payment of fringe benefits to salaried employees u Qualitative factors Make or Buy Decision u Relevant costs associated with decision Avoidable costs Opportunity costs u Qualitative factors Drop a Product or Service Decision u Relevant costs associated with decision Avoidable costs Opportunity costs u Qualitative factors Sell or Process Further Decision u Incremental revenue versus incremental cost Resource Utilization Decision u Contribution margin earned per unit of the limited resource u Qualitative factors...
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ProductPlanningDecisionsACC200 2009 - Net Income $1,000 350...

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