Decision Making Cases
1. Make or Buy
2. Accept or Reject a Special Order
3. Continue or Discontinue
Segment/Product Line
4. Sell or Process Further
5. Product Combinations/Optimization of
Scarce Resources
6. Change in Profit Factors
(SP, VC, FC, SM, Product Combination,
and Volume)
Decision Guidelines
Choose the alternative with lowest cost
Note: Consideration of OC
Accept when revenue > additional cost
(provided regular customers won’t be affected)
Continue if revenue of segment > its avoidable
costs
Process further if additional revenue from
further processing > further processing costs
Note: ignore joint costs (usually irrelevant here)
Identify the constraint/limitation on scarce
resources; prioritize the product/s with
greatest CM per unit of scare resources
Identify the factor to be changes and amount
of contemplated change; change the profit
factor if it improves company’s profit position