4ACA1_041130384_TMA1.doc - Turnitin.docx - TMA 1 Advanced Cost and Management Accounting – Answer Question 1 Manager usually based on a decision model

4ACA1_041130384_TMA1.doc - Turnitin.docx - TMA 1 Advanced...

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TMA 1: Advanced Cost and Management Accounting – Answer: Question 1 Manager usually based on a decision model for choosing among different alternatives before making any decisions. A decision model is a formal way of decision-making that often involves both quantitative and qualitative analyses. These two characteristics are play an important role when manager making decisions. Quantitative information is the outcomes that can be measured in numerical terms. These quantitative information can be divided into financial and non-financial. Quantitative financial form can be expressed in monetary terms. For instance, the cost of direct materials, direct labor, and marketing expenses. Manager could use these costs information to evaluate the performance of an organization, costing control and profit analysis, usually enables manager to control the contribution margin and gross margin. Quantitative non-financial form can be expressed in numerical data value, but they are not expressed in monetary term. For example, decrease in production time, the percentage of monthly sales target and so on. Manager can use the data of production time to analyze and improve the efficiency and effectiveness of business. Thus, a company can produces quality products faster with fewer resources. Qualitative information is the outcomes that are hard to measure accurately in numerical terms. For example, employee morale and customer satisfaction. Manager must consider the quality of products and services which it could affect to customers satisfaction after bought or use the products and services. The qualitative factor is also important for an entity even it cannot be measured easily in financial terms. The manager must wisely consider these two quantitative and qualitative factors when making an economic decision.
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Question 2 Capital budgeting is the process of making long-term planning decision for investments in projects. It analyzes each project by estimate and consider all the life-cycle cash flows from its first investment through its termination. Besides, the capital budgeting is both a decision-making and a control management tool. Let’s look at below five stages in the capital budgeting process: Stage 1: Identify projects Identify the potential capital investments that correspond with the organization strategy, i.e. can improve the business value, productivity and efficiency. Identifying which types of capital projects are good for investment, is basically the responsibility of senior line managers. Stage 2: Obtain information Gather all relevant information from all components of the value chain to analyze and evaluate alternative projects. For example, car company Proton, plant managers usually are asked about assembly times, and obtain the information such as pricing & availability from suppliers.
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