Acc530_m05_B - Module 5 Special decision-making issues Introduction In this module you will be looking at some decisions that managers have to make

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Module 5: Special decision-making issues © Curtin Business School 1/7 Introduction In this module, you will be looking at some decisions that managers have to make and the sort of information they should consider when making decisions. Decisions that are pertinent to this module include the following: decision to outsource or make a product decision to add or drop a product, service or business line decision to accept or reject a special order decisions involving limited resources. Topics Learning outcomes When you have finished studying this module, you should be able to: Relevant cost and decision- making apply the concept of relevant cost in decision-making apply the concept of relevant cost when deciding whether to make or buy apply the concept of relevant cost when making a decision on retaining an existing product line or adding a new product line apply the concept of relevant cost when a special order is received maximise profits when resources are limited. Before you begin… You should familiarise yourself with the relevant sections of your textbook before working through these module notes: pages 586 to 614. If you have any questions regarding the content of these module notes, refer to the textbook for further explanations. If you need to seek clarification from your tutor , make sure that you have carefully read the relevant sections of the textbook and the module notes beforehand.
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Accounting (Managerial) 530: Module 5: Special decision-making issues © Curtin Business School 2/7 What are relevant costs? Before jumping into each of the topics mentioned in the Introduction, you should first read pages 588 to 596 of your text, regarding decision-making. There is a common thread that runs through all of the management decisions mentioned previously. This is a very important concept, known as ‘ relevant cost ’. For costs to be relevant there are certain criteria that they must meet. The cost must: have a bearing on the future, and differ among alternatives. A cost that has an impact on the future is a cost that is incurred in the future or a cost that can be saved in the future. Any cost that only affects the past is not relevant. Also, the cost in consideration must differ between alternatives. If it makes no difference, then it is not relevant. Pages 592 to 596 of your text give you some more information on this concept. Read
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This note was uploaded on 09/19/2011 for the course ACCOUNTING 211 taught by Professor Min during the Three '11 term at Curtin.

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Acc530_m05_B - Module 5 Special decision-making issues Introduction In this module you will be looking at some decisions that managers have to make

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