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    Relevant Costing Reo

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    4 views12 pages

    Relevant Costing Reo

    Uploaded by

    Czarina Jane
    Relevant Costing Reo

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 12
    RELEVANT COSTING. CCPALE syllabus Covered 414Management Accounting Concepts and Techniques for Decision Making 4.4: Relevant costing and ferential 4.4.14 Definition and idontietion of relevant costs 1442 Concept of opportunity coats 11445 Approaches in anlyzing steratves in nonoutng decisions tots and iterena) ELA Types of detstone (make or buy, accep or floct spacial ordr, contin o aoptshutdown, sel or process further, best product combination pricing decisions) 4444) Relevant costing and dierent analysis Marginal analys or Tactcl decison making, or Relevant costing consis of choosing ameng ateratives wih a immed od ain vow Sern tactical daiions tnd 0 be shot unin nature, However, should be emphasized ta sher'vun decsion often have ong/un consequences Tacicldeckion ay be 2 smal pat of the veral sstegy ck ‘stbishing a compative ede ofa fm. Thus, aca decison ae tin emal-soue asone at save a lger Purpose Ths ovr bjcte of strategic decision making isto soloct among ataratves tha stags so that a og-arm compote advantage is estabised.Taccal decison making shoud support ths veal bjt, even i tno mediate cbctva i shotrur or sal-sale Thus, sound arial doctser-making mean at fe dcions mado rat ony ache IMelimiod ebjcve bu ako terve ager purpose In fat no acl dacion Sud be mada hal oes ol ere fhe overal Seale goa an organ, ysis Relevant costs ate used n mating acl daclsons. Tactel decison hae an med ow red abjactve In mind, ln making these declan, however, decison makers hous says hep tho decsone win an sea Famowor Reaching objectives singin But Now You ge here & perhaps even more porn. ‘nen mating a dso, you mast chaossbetwwsn at as wo coins, Tete ae various aptons lo conse ia some instances, Other slactos, on he her han, my cosets aches betwee ely wo oon, one o which may be Be waus quo, Regaless of the nurber or yes of optlons aval, he costs nd advantages each must be “weghed ding the decisonsnaingprooass way of examining shorter decison x marginal analysis (aso known as incrmental or ferental nase). focuses on cranial ost increases or decreases rather han theo cost ana boot of single abaya ealocton ol acon, The wor "short tem eer the period i suing Wh capady ie fed, wih othe ope Yost Ose The most mpocan aspect of using marina! enalss is determining which datas elven the dan. Relevant expenses and revenues are hose tat der beeen alleatives sna av oaised on hot, Cost an ovens et have aeady Boo expres x conned ate sank ais no longer mat hen making Sezer To pk antes Way, marginal deoton anaes, any expanses Roludng acid Set thal Jo Nao bolwean atatves souls be rogaead” Cots om e pst ao selvant Internation is essen oat at a sound decison Iforation fs gathered fom nleral nextel sources. Most fen ntemalsorces ara histocal records that are used 12 steratod cunt costs. Alfheugh pas oor ae Suk cost tay are aralyzod fo roca ht cos, On te ot hand xsal sees ae formato gathered for arpa, customer, super an he ie, The move vomaton gahered wl enhioe sound deoson make The Jocson maker shoul e elles to eae what aston folrantin orn dolson susions Inormatn en taketh fom of quantitate oc quate nomen, Quanta informations easurabe lo ems of uss. money, whe qualatve information cao! be ‘moat Buta of quar mpotance in cecsion making ‘THE DECISION-MAKING PROCESS. ‘The following stops are followed when performing tactical decision making + Define the problem. This sep inves determining the lsu hat must be soled. Example are make r bu, acolo rect a specal ver, comtrue or donne @ sooment among ther, The complet Ist nd Socutsion willbe poser ler, + bain information: This stp hvoves “huslon at hand, Be careful wth genera assumptone when denying relevant cost Inforaton can came fam ital or extemal ours, short run org rg format, {and qunbiav ar quaitatventrmaton. Tho grater to leva fermaton gathered wl goneral a sound business decison « Iden altarnatives: Thess nvlvc looking fr poscele slut he proslam a ad Arnaives undo lave cosig fond be Cearcut. Moaning atomtves aro roaaly avast « Determine possible consequence ofthe alternatives: Fist analyze the quanta efet f each decison. The net reas or acreasein nt income for sah aerate (Quarta ans endtohave a shorttem afc on nel ncome. Nex! is anaza qualtatve fect ofeach atemnatve.Quallatve factors lend a havea ong ‘ompany The objective isto prow he veal potty ofthe company he share and ing bs «Choose the best alternative and implement the decision. Ths phase malice ne actsl mpemertalono lars. Th advantage of Taccl decison makings tis easty reverse. Incase te ceilon maker chose he wrong alate, he can easly overt the oer aterave, 1 Evaluate performance: Tr sip invoves an analysis desta cbjecivee wore tained Tes wl alo! he hur dacscr-aking process of company. 444.3 Approaches in analyzing alternatives in non-outing decisions (total and erent) ANALYZING ALTERNATIVES. ‘There ae two approaches in anazingalerates the Tt approsch and the Dire or nremental sporoach, Teta Approach analyzes information by praparng compli sot of rari rport foreach ataive, Aor which i compas th ropa oarive at decison. Ropots generated incide al roves and expenses whether flovant or ot This appcac i not vsabe bocase Tendo betas migeadng bacale of te induce of Felorant os Diferenal Anse analyzed ony infomation hat changos botwoon atrratves Only he natncaasos revenue or costs aro luded, Coes that wil romain the Same ara excluded Tas maths eored ove the Tal approach becalse ts mpl a easy to aly, ILLUSTRATION: “Te management fa company searing 2 new aber-aving mastine that ens for P5000 por yer Data abou tha company's anal sal and cost wih and wihou the new machine ar Using total approach the analysis would be: sss tg 0 tm) moon P nea sascdapuaer em aos _ Goo einai nie Ce Sue IDENTIFYING RELEVANT COSTS “Tho two estonia charactors of Rlovat Cost aro 1) ature cost, and 2) changes between two alternatives. Boh us bo sass not oly one. Tha primary and mast lroatant chreeesie the cost should change belwoen to seatven Ha coat dos nol change, ts neve oven Acan changes belsen alamalves depending on te gen stuaon. Ths wibo dicussodn deta nts typos of shar am non southo docone ‘Abst al costs cued sat off as future cos! wen a dacision malar mands io spard may fr ier operating exonsos or capil expansas or bh As og asthe expends isnot pai remains as fur cost Bi nos pat somes hoa eae and gar evar mydeco station, Snce eon oss eure cot, is ol eed Ire took for Financ Accounting purposes. Acosta changes baween alas Is gly cependent on te deci sun. Ts wl be dscused in ct in ha types ot fhorttam ron rotine decsons. Examples of Relevant Cost «arable cosmos often variable ost ae relevant because it chang proportnatty wah quantity 1 Avosable ted cost hone nereseldeeroaee fxs cost ovat bt othe tl bed cel, = Input oss hese ae estirated oss that are yet be inured {Opportunity ect: aes sre batt revenoainean oragane for ehoosng an ternative, {Seunge nat recone ost aesocaas hon atest, Beara tat nls savings or avaiable costs te relvartn ever dacon station. opportunity Costs ‘Opportunity oe repecen the patel benefs an inva, invasir, obusinese misses auton when choosing one aemabve aver another: Gocauee by defn tay are Lassen onary ots can be easy overated, Undrtardng te petal msse poate repney chasaig ore hvesnent ove anaes fo ber dn- ing, COppertanty costa are nt recorded nthe erenzatons general gor bacaus hey dona rapresent cua poeocutays. Rane, toy represent economic bene hat re forgone 252 rau pursuing some course of ston. Opparunty cost doa nl show up dec a corps nance stalament, Bul economealyspesingoppauny cost sl vey foal Novechatss, because th a of oppo) eosc areal abebac concep, many compare, execWes, and fives Tal acount for kin her everyday daceler- rang relevant Coste Irelevant costs aro cose hat ar et incuded whan analyzing invstmentalomave. Tha relevance of an ifeoation ie cependanton the docion stuton, Bo east of gaerally {ssuming tat alent cost hone stuaion steve arate Discretionary and Commited Costs Both Discretionary an Commits costs ae fre costs but wl not change hetwecn two atarathes. Since X doesnot change btwsen No alates, fs eleva a any ‘ecson stuton Disrtonary Costs ¢rhorot oto operations, ean be elayed nthe cent pred bit vera wil peuroa. Eales aro Ropas ard Maiionanca ‘Sxpanse,Tranng and Deseret css Advertsing expense, et, hcartast Corwin cost a cette the companys cbigted oie and cannot get ut oft ost othe ne I aes ram a contact. Example Ron xooneo arin Yom Contact ot aso. Sunk cost ‘Sunk Casts historical cos ha wil no lenger change betwoon wo altaratves. is always telvantin any decision stain. Sunk cots are actual oss incured, hance ae ‘ecard in ho books for Francal According purposes is also nore in perfomance otaliaten Exar ate Jet Cos! in Salers of Provose‘uter Cast! Obclle Thvonterioe, and ost of ol oquipmertinrctaoront decison. Income Tax Incom tos are typealyiolvantin dokion aking, Tho bjt sto maximian Opaatng Income io masniz0 Not Income stration Power Systems, Ine. mondactures jet engines for the Unies States armed fra on cost ps bass The eat of a paricuar ft engine the company renulacred Is Shown Below Direct materials 200,000 Det labor "20000 Ova ‘Superviso’s salary 20.000 Fringe benets on cree laor 15,000 Deprecaton 12000 Rent 41000 Toil cost a8 000 It producton of tis engine were

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