3.1 apr%2027%20ch08.ppt

3.1 apr%2027%20ch08.ppt - ACIS 222 Relevant Costs for...

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ACIS 222 Relevant Costs for Decision Making Reading: Eldenburg et al. Chapter 8
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Ch8- Ch8- 2 Key Topics Model for non-routine decision- making Relevant costs Using the decision model Pricing decisions Limitations of the model
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Ch8- Ch8- 3 Non-routine decisions special orders keep or drop (products, segments or whole businesses) insource or outsource (make or buy) managing constrained resources
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Ch8- Ch8- 4 Model for non-routine decision-making Identify type of decision Identify relevant quantitative analysis techniques Apply relevant quantitative analysis techniques Identify and analyse qualitative factors Consider quantitative and qualitative information to make decision
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Ch8- Ch8- 5 Relevant costs deal with future courses of action differ across alternatives
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Ch8- Ch8- 6 Example 1: Relevant Costs 1. A machine already owned is kept under one alternative and disposed of under another alternative. Depreciation expense is $25 000 per year. 2. Direct materials will cost (each year) $30 000 under one alternative and $10 000 under a second alternative Are these costs relevant?
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Ch8- Ch8- 7 Application of the tactical decision model Types of business decisions: Special order Keep or drop Make or buy Sell or process further Managing constraints Pricing
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Ch8- Ch8- 8 Example 2: Special order Direct materials $ 12 Direct labour 14 Variable overhead 4 Variable selling and administrative 2 Fixed manufacturing 20 Total costs $ 52 Mark up (50%) 26 Target selling price $ 78
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Ch8- 9 A customer has made a special order to buy the product at $38 per unit. There is idle capacity – the special order can be produced without affecting current production. Should the units be sold at $38?
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This note was uploaded on 12/23/2009 for the course BCOM ACIS 222 taught by Professor Neilcrombie during the Spring '09 term at Canterbury.

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3.1 apr%2027%20ch08.ppt - ACIS 222 Relevant Costs for...

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