RELEVANT COSTS & SPECIAL DECISIONS
A. Relevant costs and benefits satisfy two criteria:
They affect the future.
They differ between (among) alternatives.
When identifying relevant information for decision making, t
In business, management must distinguish
between short-run and long-run decision
Short-run decisions are usually those for a time
frame of one year or less. However, some
companies look at a three-year horizon.
In the short-ru
Segment Reporting, Transfer Pricing, and
the Balanced Scorecard
Almost every organization has subunits with
identifiable collections of related resources and
These subunits, or segments, can be class
Definition of a Budget
A Budget is:
a plan showing a companys objectives and
proposed ways of obtaining the objectives.
Definition of a master budget
A Master Budget consists of a planned operating
budget and a financial budget
The planned operating bu
Advanced technology environments
What is an advanced technology environment?
As a result of the changing business
technology innovations, and computerization,
EVERY environment has some aspect of
Two cost accumulation systems
There are two basic types of cost accumulation
Job order cost: costs to produce a product are
accumulated for each job.
Process cost: costs are accumulated according
to the process or departments.
Goal of cost accu
Basic Concepts of
Financial versus managerial accounting
Financial accounting: reports financial
information to external users such as:
Current and potential investors
Current and potential creditors
Cost Behavior and Estimation
Importance of cost behavior patterns
Cost behavior patterns, or cost functions, must
be identified and understood so that future costs
can be predicted.
The prediction of future costs is important to