University:
York University
Course:
SB/ACTG 2020 | Management Accounting Concepts
Academic year:

2024
Views:

304

Pages:

1
Author:

Niklas

Topic 11: chpt 14 (mco, sect B4c) Stages in the Decision Making Process: Identify the decision problem: Before a decision can be made, the problem needs to be identified and defined in non-specific terms. Specifying the criterion: Once the problem is identified, the criterion required to make a sound decision needs to be established. Identifying the alternatives: Decision-makers should identify as many feasible courses of action as possible. Developing a decision model: Decision models help distinguish between fact and uncertainly. Collecting the data: Once a decision model is formulated, data is collected on alternatives through a structured process. Selecting an alternative: The optimal course of action is selected. Quantitative vs Qualitative Analysis: Quantitative Analysis: Includes accounting data typically expressed in quantifiable terms. Qualitative Analysis: Factors in the decision process that cannot be expressed directly in numbers. Decision Problems Containing Qualitative Factors: Certainty: Information is perfect. Uncertainty: Information is imperfect. Risk: The probability of different outcomes for different decisions is known. Relevant Costs: Sunk Costs: Costs that have already been incurred; they do not affect any future course of action. Differential Costs: Difference in cost that arises when we decide on one action over another. Opportunity Costs: Potential benefit given up when one choice is selected over another. Tests of Market-Pricing: Add-one-more-unit pricing: Incremental pricing: Full-line pricing: Questions to consider when utilizing the make-or-buy decision: Whether the outside supplier can provide the product when it is needed. Whether the outside supplier can provide the product at a lower cost. Whether the outside supplier can provide the product with better quality.