sample_chapter - Chapter 4 Relevant Costs for Nonroutine...

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Chapter 4 Relevant Costs for Nonroutine Operating Decisions Study Checklist – Monitor your progress 1. Read the chapter in the text 2. Review the learning objectives below 3. Read the overview of the chapter 4. Read the chapter review for learning objectives 1 - 4 5. Do Problem Set A and check your answers 6. Read the chapter review for learning objectives 5 - 7 7. Do Problem Set B and check your answers 8. Do the End of Chapter Exercises in this study guide 9. Do the homework assigned by your instructor CHAPTER LEARNING OBJECTIVES After studying this chapter, you should be able to answer the following questions: Q1. What is the process for making nonroutine operating decisions? Q2. How are decisions made to accept, reject, and price special orders? Q3. How are decisions made to keep or drop products, segments, or whole businesses? Q4. How are decisions made to insource or outsource an activity (make or buy)? Q5. How are decisions made for product emphasis and constrained resources? Q6. What qualitative factors are important to nonroutine operating decisions? Q7. What limitations and uncertainties should be considered when making nonroutine operating decisions? OVERVIEW OF CHAPTER Managers rely on management accountants for assistance in making nonroutine operating decisions such as whether to accept a customer's special order, or whether to keep or eliminate a seemingly unprofitable business segment. Other examples of nonroutine operating decisions include whether or not to outsource a business activity (or the manufacture of a subcomponent) and how to allocate scarce resources to products. There are quantitative decision rules to use for these types of decisions, but the quality of the information used must be considered, as must any relevant qualitative factors, before a final decision is made.
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4-2 Chapter 4 - Student Study Guide for Eldenburg & Wolcott’s Cost Management, 1st Edition ___________________________________________________________________________ CHAPTER REVIEW: Learning Objectives 1 - 4 Q1: What is the process for making nonroutine operating decisions? The general rule is to choose the alternative that maximizes profits (subject to qualitative considerations). This general rule can be made more specific once the nature of the decision at hand is identified. The process for making nonroutine operating decisions is: Identify the type of decision to be made Identify the relevant quantitative analysis technique(s) Apply the relevant quantitative analysis technique(s) o Identify the variables that are required as input, and which of these are known versus unknown o Estimate the unknown input variables o Apply the general rule for this type of decision o Interpret the results, taking the quality of information into consideration Identify and analyze the qualitative factors Consider the quantitative and qualitative information and make a decision Q2: How are decisions made to accept, reject, and price special orders?
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sample_chapter - Chapter 4 Relevant Costs for Nonroutine...

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