Cost Accounting

Decision Making and Relevant study

Five-Step Decision-Making Process
? A decision mannikin is a formal method of making a choice, oft involving both quantitative and qualitative analyses. ? Managers often use well-nigh variation of the Five-Step Decision-Making Process.

Step 1: Obtain randomness

Step 2: Make Predictions About Future Costs

Step 3: take in An Alternative

Step 4: Implement The Decision

Step 5: evaluate Performance

Feedback
? Much of this chapter focuses on Choosing an alternative. ? The concept of relevance willing be largely used for this stage.

The concept of Relevance
? Relevant Information has two characteristics:
? It occurs in the coming(prenominal). ? It differs among the alternatives being considered.

? Relevant Revenues (Costs).
? Expected future revenues (costs) that differ among the alternatives. ? If they ar non different among alternatives, they are not relevant.

? Something happened in the past is not relevant.
? Past costs are not relevant sunk cost because they are not avoidable and cannot be

changed no matter what action is taken.





? Quantitative and qualitative Relevant Information
? Quantitative factors are outcomes that are metric in numerical terms
?

both financial ( expressed in monetary terms) and non-financial (not expressed in monetary terms, but can be measured numerically). Employee morale

? Qualitative factors are outcomes that are difficult to measure in numerical terms
?

? Relevant-cost analysis generally emphasizes quantitative factors.

Relevant Information Illustration (Exhibit 11-2)
Two alternatives: 1. Do not reorganize, 2. bump around Reorganize means that a) fires 5 material handling workers (to reduce project costs) & b) leases new machine

Quantitative (mainly financial) analysis. Qualitative factors ? negative effect on employee morale of laying off employees.

Types of Decisions
? Special Orders (One-Time-Only) ? Make or Buy (Insourcing vs....If you want to get a full essay, range it on our website: Ordercustompaper.com



If you want to get a full essay, wisit our page: write my paper