Cost Accounting Foundations and Evolutions Kinney, Prather, Raiborn
اسلاید 1: Chapter 10Relevant Informationfor Decision MakingCost AccountingFoundations and EvolutionsKinney, Prather, Raiborn
اسلاید 2: Learning Objectives (1 of 2)List the relevant decision-making factorsDefine sunk costs and clarify why they are not relevant in making decisionsDescribe the relevant financial considerations in outsourcing Explain how management can make the best use of scarce resources
اسلاید 3: Learning Objectives (2 of 2)Describe how sales mix pertains to relevant costing problemsDemonstrate how special prices are set and when special prices are usedExplain how segment margin is used to determine whether or not to retain a product line(Appendix) Describe how a linear programming problem is formulated
اسلاید 4: Relevant CostingIncremental Revenue - the amount of revenue that differs across decision choicesIncremental Cost or Differential Cost - the amount of cost that varies across decision choicesIncremental Benefit - the difference between incremental revenue and incremental cost
اسلاید 5: Relevant CostingOpportunity Costs - benefits foregone because one course of action is chosen over another
اسلاید 6: Relevant CostingSunk Cost are costs incurred in the past to acquire an asset or a resourcenot relevant because they cannot be changed regardless of future actionsnot recoverable SUNK COSTS ARE IRRELEVANT
اسلاید 7: Relevant Costing and Business DecisionsOutsourcing a product or partReplacing an assetAllocating scarce resourcesAccepting special ordersDetermining the sales/production mix
اسلاید 8: Outsourcing Make-or-Buy DecisionsQuantitative FactorsIncremental production costs per unitCost to purchase outsideNumber of available suppliersCash flowProduction capacity availableOpportunity costs of production facilitiesSpace available for storageInventory carrying costsIncrease in throughput from buying components
اسلاید 9: Outsourcing Make-or-Buy DecisionsQualitative FactorsReliability of supply sourcesAbility to control quality of items purchased outsideNature/importance of the work to be subcontractedImpact on customers and marketsFuture bargaining position with supplier(s)Perceptions about future price changesPerceptions about current product prices
اسلاید 10: Services Often OutsourcedAccounting and legal servicesEngineering servicesEmployee health servicesContinuing professional education for accounting and law firmsProduct/process design activities School bus programs
اسلاید 11: Scarce ResourcesChoose product or service with highest contribution margin per unit of scarce resourceWhen there are several limiting factors, use linear programming to choose product or service
اسلاید 12: Sales Mix DecisionSales Mix - relative quantities of the products that make up the total sales of a companyFactors affecting sales mix includeProduct selling pricesSalesforce compensationAdvertising expenditures
اسلاید 13: Special Order DecisionsSales price should coverVariable production and selling costsIncremental fixed costsProfit
اسلاید 14: Special Order DecisionLow-ball bid To introduce product or service to particular marketSales price at or below costCannot be continued over the long run
اسلاید 15: Special Order DecisionPrivate-label orderBuyer’s name (not producer’s) attached to the productAccept during slack periods to use available capacityFixed costs usually not allocatedVariable selling costs often reduced/eliminatedSales price covers variable costs plus profit
اسلاید 16: Special Order DecisionSpecial prices can also be considered for Unusual quantity, delivery, packaging, or customization of productOne-time job such as an overseas order that will not affect the domestic market
اسلاید 17: Special Order DecisionsQualitative FactorsImpact on future prices and salesSufficient contribution margin to justify the additional burden on workers and management Impact on scarce resources and throughputWorkforce employed during slow timesRobinson-Patman Act
اسلاید 18: Special Order DecisionsRobinson-Patman Act Requires that cost differences result from actual variations in the cost to manufacture, sell, or distribute because of different methods of production or quantities soldProhibits companies from pricing the same product at different levels when those amounts do not reflect related cost differences
اسلاید 19: Special Order DecisionsAd Hoc DiscountsPrice concessions related to real (or imagined) competitive pressures rather than to the location of the merchandising chain or volume purchased
اسلاید 20: Product Line DecisionsSeparate costs by Product LineRevenueVariable costsAvoidable direct fixed costsUnavoidable direct fixed costsCommon Costs
اسلاید 21: QuestionsWhat are some relevant financial considerations when making an outsourcing decision?How are prices set for special orders?What types of decisions require segment margin income statements?
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