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© 2007 Pearson Education Canada Slide 8-1 Relevant Information and Decision Making: Marketing Decisions 8
© 2007 Pearson Education Canada Slide 8-2 Relevant Costs and Revenues Relevant Costs or Revenues The predicted future costs or future revenues that differ among the alternatives being considered Historical costs are not by themselves relevant; historical data are useful only in that they may help predict future events Examples: special sales orders, deleting / adding products or departments, optimal use of limited resources, make of buy decisions, sell or process further decisions
© 2007 Pearson Education Canada Slide 8-3 Accuracy and Relevance Ideally one would like relevant and accurate information However decision makers must weigh the extra cost of obtaining more accurate information, against the benefit which the increased accuracy offers
© 2007 Pearson Education Canada Slide 8-4 Decision Process and Role of Information Historical Information Other Information Prediction Method Decision Model Implementation & Evaluation Feedback Collect relevant information Use the information as a basis for predicting the future Make a decision based on the quantitative and qualitative information Chosen action is implemented and evaluation of performance is main source of feedback
© 2007 Pearson Education Canada Slide 8-5 Special Sales Order special one-time order from a customer at a reduced price WithNoSpecial Order Relevant revenue: 100,000 @ $13.00$1,300,000$0 Relevant costs: 100,000 @ $12.00(1,200,000)0 Incremental income$100,000$0
© 2007 Pearson Education Canada Slide 8-6 Deleting or Adding Products or Departments special decision to add or delete a product line or department KeepDrop GroceryGroceryDifference Relevant revenue:$1,900$1,000$900 Relevant costs: Variable costs1,420800620 Fixed costs (avoidable)265150115 Incremental income$215$50$165
© 2007 Pearson Education Canada Slide 8-7 Optimal Use of Limited Resources when something constrains or limits operations labour hours, machine hours, raw material, space determine contribution margin per the limiting factor allocate usage to maximum profit SilverGold Contribution margin per unit$12.00$27.00 Units per hour3010 Contribution margin per hour$360.00$270.00 allocate capacity to “Silver” up to expected demand, and then allocate remaining capacity to “Gold”
© 2007 Pearson Education Canada Slide 8-8 Pricing Decisions Price is a function of cost elasticity of demand competitors actions marketing considerations business strategy When relating cost to price always consider the diversity in costs among the various products Variable Costs Variable Costs Contribution Approach Absorption Approach Mark-Up 52.67% Fixed Costs Mark-Up 5.26%
© 2007 Pearson Education Canada Slide 8-9 Target Pricing & Target Costing Traditional Approach Determine costs and add on a mark-up to set selling prices Target Costing and Target Pricing First determine the price at which the product will sell Then design a product to be produced at a low enough cost to provide an adequate profit margin over target cost Target Price Target Costs + Mark-Up = Price - Margin =
© 2007 Pearson Education Canada Slide 8-10 “Cost-Plus” Often the basis for target prices The size of the “plus” depends on target (desired) operating outcomes Target prices can be based on a host of different markups based on a host of different definitions of cost There are many ways to arrive at the same target price
© 2002 Pearson Education Canada Inc. Slide 8-1 Relevant Information and Decision Making: Marketing Decisions 8.
© 1999 Prentice-Hall Canada Inc. Slide 31 Optimal Use of Limited Resources when something constrains or limits operations (labour hours, machine hours,
Copyright © 2003 Pearson Education Canada Inc. Slide Chapter 11 Decision Making and Relevant Information.
Fundamentals of Cost Analysis for Decision Making Chapter 4 Acc
5 - 1 Chapter 5 Relevant Information and Decision Making: Marketing Decisions.
9 - 1 ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 9 Relevant Information and.
5 - 1 ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 5 Relevant Information and.
Chapter Thirteen Short-Run Decision Making: Relevant Costing COPYRIGHT © 2012 Nelson Education Ltd.
©2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton Relevant Information and Decision.
30-1. Cost-Revenue Analysis for Decision Making Section 1: The Decision Process Chapter 30 Section Objectives 1.Explain the basic steps in the decision-making.
AS Business Studies Marketing. Cost-based pricing Cost plus pricing The business assesses the cost per unit and adds an amount on top (profit margin)
Chapter 25 Short-Term Business Decisions. Learning Objectives 1.Identify information that is relevant for making short- term decisions 2.Make regular.
Chapter 10 - slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Ten Pricing: Understanding and Capturing Customer Value.
2009 Foster School of Business Cost Accounting L.DuCharme 1 Decision Making and Relevant Information Chapter 11.
Crosson Needles Managerial Accounting 10e Short-Run Decision Analysis 9 C H A P T E R © human/iStockphoto ©2014 Cengage Learning. All Rights Reserved.
1 Bruce Bowhill University of Portsmouth ISBN: © 2008 John Wiley & Sons Ltd.
10-1 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Tactical Decision Making 12 PowerPresentation® prepared by David J. McConomy, Queen’s.
McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Eleven Cost Behavior, Operating Leverage, and CVP Analysis.
Capacity Planning. How much long-range capacity is needed When more capacity is needed Where facilities should be located (location) How facilities should.
Decision Making and Relevant Information Chapter 11.
Copyright © 2008 Prentice Hall All rights reserved 8-1 Short-Term Business Decisions Chapter 8.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
© 2012 Pearson Prentice Hall. All rights reserved. Using Costs in Decision Making Chapter 3.
Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a Management Accounting: Information for managing and creating value 4e Slides prepared by Kim Langfield-Smith.
Chapter 26 Part 1. Management’s Decision-Making Process Important management function Does not always follow a set pattern Decisions vary in scope, urgency,
Cost-Volume-Profit Relationships Chapter LEARNING OBJECTIVES 1.Explain how changes in activity affect contribution margin. 2.Compute the contribution.
PPT Don R. Hansen Maryanne M. Mowen COST MANAGEMENT.
Fundamentals of Cost Analysis for Decision Making Chapter 4 Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.
AC239 Managerial Accounting Seminar 9 Jim Eads, CPA, MST, MSF Differential Analysis and Product Pricing 1.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Relevant Costs for Short-Term Decisions Chapter 8 1.
Differential Analysis: Key to Decision Making. Incremental Analysis A technique used in decision analysis that compares alternatives by focusing on the.
Decision-Making. learning objectives the scope of decision-making the seven steps of the decision-making process relevant costs examples of practical.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011.
Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Appendix B Profitability Analysis.
© 2012 McGraw-Hill Education (Asia) Profitability Analysis Appendix B.
13 Relevant Costs for Decision Making Chapter Future revenues or costs that differ among alternatives. Is the cost of equipment purchased in the past relevant?
©2008 Prentice Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgstahler Introduction.
Pricing Strategies the price is what you pay, the value is what you receive…anonymous.
Financial and Managerial Accounting John J. Wild Third Edition John J. Wild Third Edition McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,
1 Theory of Constraints Short-term Capacity Optimization.
Chapter 26-1 Chapter 26 Incremental Analysis and Capital Budgeting Accounting Principles, Ninth Edition.
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© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13 Cost Management and Decision Making.
Chapter Ten Pricing: Understanding and Capturing Customer Value Copyright ©2014 by Pearson Education, Inc. All rights reserved.
© Pearson Education Limited 2008 MANAGEMENT ACCOUNTING Cheryl S. McWatters, Jerold L. Zimmerman, Dale C. Morse Cheryl S. McWatters, Jerold L. Zimmerman,
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13 Cost Management and Decision Making.
Relevant Cost Decisions DECISION MAKING IN THE SHORT TERM.
4.4 Price Chapter 27. Price Price is the amount paid by consumers for a product.
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