Feb+10 - ManagerialAccounting DiscussionSessionFeb10,2012...

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Managerial Accounting Discussion Session Feb 10, 2012 Hoyt She
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What you need to know… Identify relevant and irrelevant costs and benefits in a decision. Keep or drop? Out sourcing decision Make or Buy Accept a special order?
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Relevant Cost A relevant cost is a cost that differs between alternatives.
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Prof Geyer’s 5-step approach 1. Identify decision alternatives. 2. Determine relevant factors. 3. Calculate potential benefits. 4. Calculate potential costs. 5. Make recommendation.
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Keep or Drop What are the avoidable costs? What is the loss in revenue? Watch out for fixed costs! Some are sunk costs (irrelevant – don’t consider) Some can be avoided (relevant – consider)
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Make or Buy? Ask the same questions as Keep or Drop. Keep in mind the economies of scale The more the volume, the cheaper it gets to make in- house.
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Special Order Pay attention to opportunity cost Opportunity cost Revenue to forego due to making in-house
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This note was uploaded on 03/08/2012 for the course ECON 155 taught by Professor Klein during the Spring '12 term at University of California, Berkeley.

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Feb+10 - ManagerialAccounting DiscussionSessionFeb10,2012...

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