1. Relevant costing – making good business decisions
Special order, segment elimination, outsourcing

2. Managerial Accounting Terms
Quantitative data
Qualitative data
Sunk costs
Opportunity costs Relevant costs
Relevant revenues
Number crunching data for what if decisions and impact on profits.
Other important data – effect of decisions on current and future customers, employees, community, quality of product, suppliers, etc. which may later impact the bottom line
Costs involving decisions made and monies spent, and therefore not useful for future decisions.
When making a current decision, what other actions are you not doing and what is the impact on revenues and expenses?
Costs that are future oriented, out of pocket, and true if you chose to do X and not Y (incremental, differential or avoidable costs)
Revenues that are future oriented, that will only be true if you pick X and not Y (incremental revenues, differential revenues)

3. Segment Elimination
Should we close down a department, product line, or branch?
Existing financial accounting statements may not be useful to make good business decisions.
Look for avoidable costs and relevant revenues
Be careful to look at impact on other segments, customers, employees, etc.

4. Special Order Short-run decisions
Should we accept a special order with a selling price below the normal price?
Short-run decisions
One time order considered if within relevant range
May increase total profits if at least covers variable costs
Consider only relevant revenues and avoidable costs
Consider impact on existing customers and other qualitative issues

5. Make or Buy Decisions
Should we produce all the parts or some or no parts, but still sell the product?
Consider avoidable costs over a range of activity
Qualitative issues are important – number of suppliers, reliability, capacity, effect on existing employees no longer needed, etc.

6. Different categories of costs
Unit-level
Batch-level
Product-level
Facility-level
Costs incurred when producing one more unit of product (often relevant in decisions) examples – direct materials, direct labor, variable overhead, sales commissions, shipping and packaging costs
Costs incurred when working on a grouping of items (step function – example, set-up costs to do a print job run)
Costs only incurred for a specific product – costs incurred to improve the product, inspection costs, costs of patents related to the product, etc.
Costs incurred for the entire company. – such as depreciation or rent on the building, support functions like accounting and HR, insurance, taxes of various kinds (often not relevant in decisions unless close the entire company)