ACCT 102 Lecture Notes Chapter 23 SPR 2010

ACCT 102 Lecture Notes Chapter 23 SPR 2010 - ACCT 102...

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ACCT 102 - Lecture Notes - Schmidt Chapter 23 – Relevant costing for Managerial Decisions Goals: To be able to determine which costs (and revenues) are relevant and exclude those that are not To be able to apply decision making tools to short term managerial decisions To be able to determine a product’s selling price using a variety of methods The Importance of Relevant Costs Managers have access to all types of data, especially in this information age. The key is deciding what data is useful and relevant to the decisions to be made. There are lots of key terms and definitions in this chapter, and you should spend some time becoming familiar with them. Some of these are as follows: Sunk Costs – These are costs that have already been expended and cannot be reversed or changed. Sunk costs are irrelevant to future decisions. They should be excluded from your analyses. Out of Pocket Costs – require future cash outlays and are very relevant to future decisions Opportunity Costs – a potential benefit that may be lost if one alternative choice is made. Many times, such costs should be considered. Relevant benefits – additional or incremental revenue by choosing an alternative course of action. This is relevant to managerial decisions. Avoidable costs
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This note was uploaded on 03/08/2012 for the course ACCT 102 taught by Professor D.schmidt during the Winter '12 term at Cerritos College.

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ACCT 102 Lecture Notes Chapter 23 SPR 2010 - ACCT 102...

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