Wk 6 Notes Essay

Submitted By Acct123Final
Words: 523
Pages: 3

Ch 23 Summary of Study Objectives | |

| 1 | Identify the steps in management's decision-making process. Management's decision-making process is: (a) identify the problem and assign responsibility, (b) determine and evaluate possible courses ofaction, (c) make the decision, and (d) review the results of the decision. | | 2 | Describe the concept of incremental analysis. Incremental analysis identifies financial data that change under alternative courses of action. These data are relevant to the decision because they will vary in the future among the possible alternatives. | | 3 | Identify the relevant costs in accepting an order at a special price. The relevant information in accepting an order at a special price is the difference between the variable costs to produce the special order and expected revenues. | | 4 | Identify the relevant costs in a make-or-buy decision. In a make-or-buy decision, the relevant costs are (a) the manufacturing costs that will be saved, (b) the purchase price, and (c) opportunity costs. | | 5 | Give the decision rule for whether to sell or process materials further. The decision rule for whether to sell or process materials further is: Process further as long as the incremental revenue from processing exceeds the incremental processing costs. | | 6 | Identify the factors to consider in retaining or replacing equipment. The factors to consider in determining whether equipment should be retained or replaced are the effects on variable costs and the cost of the new equipment. Also, any trade-in allowance or cash disposal value of the existing asset must be considered. | | 7 | Explain the relevant factors in whether to eliminate an unprofitable segment. In deciding whether to eliminate an unprofitable segment, determine the contribution margin, if any, produced by the segment and the disposition of the segment's fixed expenses. | | 8 | Determine which products to make and sell when resources are limited. When a company has limited resources, find the contribution margin per unit of limited resource. Then multiply this amount by the units of limited resource to determine which product maximizes net income. | | 9 |…