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PPT_for_Chapter_7_without_in-class_assignment

PPT_for_Chapter_7_without_in-class_assignment - ACC 200...

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ACC 200 Fall 2010 Chapter 7 Roby B. Sawyers, CPA, Ph.D. College of Management
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To record your attendance, click on “1” 2 30 1. Yes, I am here today! Answer Now
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3 Primary Topics The Special Order Decision The Make or Buy Decision The Drop or Keep a Product Decision The Sell or Process Further Decision Limited Resource Decisions
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4 The Special Order Decision Compare incremental revenue with incremental costs The key is which costs are incremental? Fixed costs are usually not relevant to the decision
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5 Example 1: Facts : Regular sales price per hot dog = $2.00 Each hot dog has $1 of variable costs and $.35 of fixed overhead costs. A special order is received for 100 hotdogs at a price of $125 ($1.25 each) Assume excess capacity exists.
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6 The Make or Buy Decision Compare the relevant (incremental) costs of making a component internally with the relevant (incremental) costs of buying the component externally The key is which costs are relevant?
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