Ch10SummaryPoints - Summary of Chapter 7 (since the 2nd...

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Summary of Chapter 7 (since the 2 nd mid-term) I. Budgeting Why budget? The Master Budget – The process, dependent and independent variables Flexible budgeting Summary of Chapter 10 – Incremental Decisions I. Key Factors For Most Incremental Decisions Does it have a positive direct contribution margin? Does excess capacity exist and are there alternative uses of capacity? Is this a “one time” deal or repeat business? Does this interfere with regular business? Can we ignore common and indirect (mostly fixed) costs? Yes! II. Decisions A. Make or Buy Format: T-account Incremental make versus incremental buy costs Answer is the lower cost of the two choices B. Special Sales Format: Incremental revenue minus incremental costs Positive DCM and use of capacity One time or continuing C. Scarce Resource Format: Calculate the contribution margin per unit of scarce resource Get to variable CM and MULTIPLY output per unit of resource OR DIVIDE by the resource per unit of output Generally, ignore fixed costs
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D. Process Further
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This note was uploaded on 03/30/2008 for the course ACCT 202 taught by Professor Sollenberger during the Spring '08 term at Michigan State University.

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Ch10SummaryPoints - Summary of Chapter 7 (since the 2nd...

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