University:
McMaster University
Course:
ACC 928 | Introductory Management Accounting
Academic year:

2022
Views:

399

Pages:

2
Author:

Sabrina S.

CH Short term business 8 decisions Describe the term & Calculate opportunity cost. Opportunity Cost: is the CM that is lost for each regular sale that fulfilled cannot CM Lost CM Unit (for regular sales) x # regular sales lost Describe the 2 Keys to making short-term decisions ~ Focus on relevant revenues/ Costs/profits. Use CM approach that separates variable & fixed costs. be Apply incremental analyers in deciding to accept a special order Special order if expected increase in revenues exceeds expected increase in variable / Fixed costs If expected increase in revenues is less than expected increase in variable / fixed costs Accept the special order Reject the special order Apply incrememal analysis in deciding whether to make or buy a part Outsourcing decisions Produce it in-house. aka make-or-buy decisions whether to buy a Product/service or Apply incremental analysis in deciding whether to drop a produd line. ~ Does the product provide a tve CM? ~ will fixed costs continue to exist even if we drop the produd? 2 Ave there any direct fixed costs that can be avoided if we drop the product? N Will dropping the product affect sales of the company's other products? What could we do with the freed capacity? Apply CM per constenint method in deciding on a product mie Companies do not have unlimited resources. Constraints thod restrict production/sale of product Vary from company to company ~ Manufacturer the production constraint is often the if of availble machine hours. Merchandiser Eg The Bay, the primary constreit is volume of display spore. Use incremental analysis to decide whether to sell as is or process further Companies in these industries process a raw material to a point before it is saleable.