Premium Essay

Relevant Information for Decision Making

In:

Submitted By roliza8
Words 7862
Pages 32
-------------------------------------------------
Chapter 10—Relevant Information for Decision Making

MULTIPLE CHOICE

1. Costs forgone when an individual or organization chooses one option over another are a. | budgeted costs. | b. | sunk costs. | c. | historical costs. | d. | opportunity costs. |

ANS: D PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

2. Which of the following costs would not be accounted for in a company's recordkeeping system? a. | an unexpired cost | b. | an expired cost | c. | a product cost | d. | an opportunity cost |

ANS: D PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

3. Which of the following is not a characteristic of relevant costing information? It is a. | associated with the decision under consideration. | b. | significant to the decision maker. | c. | readily quantifiable. | d. | related to a future endeavor. |

ANS: C PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

4. A fixed cost is relevant if it is a. | uncontrollable. | b. | avoidable. | c. | sunk. | d. | a product cost. |

ANS: B PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

5. Relevant costs are a. | all fixed and variable costs. | b. | all costs that would be incurred within the relevant range of production. | c. | past costs that are expected to be different in the future. | d. | anticipated future costs that will differ among various alternatives. |

ANS: D PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB: Reflective

Similar Documents

Premium Essay

Administration

...A User’s Guide to Administrative Decision Making Delivering good decisions A User’s Guide to Administrative Decision Making 1 2 A User’s Guide to Administrative Decision Making A User’s Guide to Administrative Decision Making WHAT IS THE PURPOSE OF The Guide? ARE YOU AN ADMINISTRATIVE DECISION MAKER? This is a guide to the issues that administrative decision makers need to consider when making decisions. Its goal is to help decision makers make better decisions that have proper regard to people’s rights and interests and are less likely to be challenged in a court or tribunal. This guide should be used in combination with detailed training in administrative law. Common examples of administrative decision makers are ministers, officers working within government departments or local councils, and people authorised to make decisions on behalf of those ministers or officers. WHAT IS ADMINISTRATIVE LAW? Administrative law is a set of principles contained in both court decisions and legislation. It sets out how administrative decision makers must make decisions and provides affected people with a way to challenge those decisions. Administrative decisions are usually made under legislation and are directed towards a particular person (or organisation). They are different from contractual and commercial decisions and policy and political decisions. Examples of administrative decisions include: ●● ●● Issuing a licence to...

Words: 4234 - Pages: 17

Premium Essay

Acdm

...in taking decisions is relevant or irrelevant, and to choose between the best alternative which obtain a higher operating income than the other. Methodology A descriptive analytical approach was taken to conduct this study. Source of information: Secondary source of information was taken in account to collect relevant information about the topic - Secondary: Books, Article, website, references, other study. Findings: Relevant cost Relevant costs is “The costs appropriate to a specific management decision” A study of relevant costs and benefits helps make better decision They are future costs and revenues. – They are cash flows. – They are incremental costs and revenues. In order to qualify for relevancy, a cost must meet two criteria: (i) They affect the future and (ii) They differ among alternatives. Normally, the following are relevant Costs: Differential cost: A differential cost is the difference in cost items under two or more decision alternatives specifically two different projects or situations. Where same item with the same amount Appears in all alternatives, it is irrelevant Irrelevant cost: Sunk costs: are past costs. These cannot be changed with any future decision.. It is a sunk cost and therefore irrelevant to the decision. Measuring Relevant Costs and Revenues for Decision-Making: The Meaning of Relevance: The relevant costs and benefits required for decision-making are only those that will be affected by decision. Costs and...

Words: 1022 - Pages: 5

Premium Essay

Management Accounting

...Pambudi 13311293 The Rule Accounting information in decision making Introduction In this day organization on business activity always face the problem including internal and external problem. Decision making be required for face the problem and make the organization get higher profit than before. One of the factors to support the decision making is the need for an adequate information system so that if there occurs an error in the company's policy, managers can make decisions quickly to address these issues. to obtain adequate information we need accounting information. Accounting information is a systematic connective issue in the presentation of useful information and can power to help leaders companies in an effort to achieve organizational goals that have been set previously. If accounting information connected with object information like product and companies activity it will generate accurate accounting information, It will help manager make right decision and useful for organizational behavior and human behavior in organization. Decision making divided into two, long-term decision and short-term decision. Long-term decision was made by manager can useful for one year or more. Example for long term decision are buy or rent a machine, buy machine with cash or credit, etc. short-term decision was made by manager, when that decision was made will directly affect for organizational or employees. Examples of short term decision are what products should the business make...

Words: 1115 - Pages: 5

Premium Essay

Nice

...of information systems in supporting decision making process. For this purpose, role of different types of information systems such as, Management Information System (MIS), Decision Support System (DSS), Enterprise Resource Planning System (ERP), Executive Information System (EIS), specifically agent-based information systems have been analysed in the different aspects of decision making process. For this purpose ten highly relevant journal articles have been selected and the body of this report is based upon the literature of those articles. From the research of this report, it is has been found out that different types of information systems facilitates managers working at different levels of organisations in making effective decision. It has been identified that organisations operate in highly vibrant and impulsive environment that changes rapidly. Based on these changes, executives and higher level managers have to make decisions accordingly. This decision making process requires a lot of subjective information about the external environment upon which decisions have to be made Annotated Bibliography 1. Ucakturk, A. & Villardb, M., 2013. The Effects of Management Information and ERP Systems on Strategic Knowledge Management and Decision-Making. Social and Behavioural Sciences, Vol 99, pp. 1035 – 1043. In this article, Ucakturk and Villardb have discussed the effects of management information and ERP systems on strategic knowledge management and decision-making processes...

Words: 3871 - Pages: 16

Free Essay

Finacila

...After reading the chapter 2 of Intermediate Accounting and Chapter 4 of Financial Accounting, I can conclude that accounting information has to have some qualities for making decisions which is the objective of accounting, one of the most important qualities for me is relevance. why is relevance is the most important? relevant accounting information is very important for businesses to make the right decision on the right time, it helps companies on predicting future outcomes, analyzing past and current outcomes. Companies present accounting information to internal and external business stakeholders for creation decisions. Relevant to investors, creditors, and others for investment, credit, and similar decisions, accounting information must be capable of making dissimilarity in a decision. Relevant in sequence should have predictive value, feedback value, and timeliness. Relevant information helps decision makers make predictions about future; it has "Predictive Value".retrieved from http://my.studyindenmark.dk/profiles/blogs/the-main-qualitative-characteristics-of-accounting-information. let me tell you this story, my brother in law had a pastry company, it is a small business. He was delivering pastry for a supermarket, he was making a lot of money. He hired an accountant who was providing my brother in law with false information, who didn't have any idea about numbers, so he trusted his accountant. my brother is law was working so hard to satisfy the supermarket needs, and...

Words: 278 - Pages: 2

Premium Essay

Accounting Concepts and Structures

... “the objectives of financial reporting are to provide information that is: (1) useful to those making investment and credit decisions; (2) helpful to present and potential investors and creditors in assessing the amounts, timing, and uncertainty of future cash flows; and (3) about economic resources,” (pg. 31). For accounting information to be effective, it must have primary and secondary decision making qualities. The qualities described below are an effective means to making decisions towards a company’s financial goals. Relevance and reliability are the two primary qualities in accounting information used in decision making, while comparability and consistency are secondary qualities in accounting information which further promotes and provides specimens for examination to further cement the decision. Relevance The first qualitative characteristic is relevance. Relevance speaks to information’s ability to influence a decision. Relevant information should be applicable, pertinent, and important. According to Kieso, Weygandt and Warfield (2007), “accounting information must be capable of making a difference in a decision in order to be relevant and information with no bearing on a decision is irrelevant,” (pg. 33). It should directly speak to the issue at hand without side-stepping or vacuity. For the information to be relevant it must also be appropriate with the time constraints allowed. For example, information relating to past experiences or actions to be taken too...

Words: 726 - Pages: 3

Premium Essay

Short Term Decisions

...Short-term Decision Making 5.1 Introduction and objectives Previous chapters have focused on the nature of costs and how they behave in relation to changes in activity and over time. The nature of costs is an important factor to consider in decision making. Types of decisions are usually split into short and long-term. Chapter 14 (Capital Investment Appraisal) considers the longer-term decision-making process, whilst this chapter focuses on the short-term. After studying this chapter you will be able to: „„ Understand costs that are relevant to the decision-making process in different circumstances „„ Demonstrate working knowledge of typical short-term decisions managers have to make and how financial data can support these decisions „„ Recognise the issues of managing scarce recourses in decision making; and „„ Appreciate the implications of outsourcing in a business context. 5.2 Relevant costs in decision making Relevant costing is a management accounting term and relates to focusing on only the costs relevant to a specific decision being made. It simplifies the decision-making process as it ignores cost data that is ‘irrelevant’, or will not have an impact on the specific decision being made. When making a particular decision-relevant costs are those that may change, depending on the decision taken. Relevant costing is often used in short-term decision making and a number of specific practical examples are illustrated later in this chapter. A typical decision could...

Words: 1147 - Pages: 5

Premium Essay

Knowledge Management

...different from information. Both are needed for effective decision making.  Knowledge of a domain helps identify which information is relevant.  Strategic Knowledge Management addresses the four major weaknesses in the strategic decision making process.  Strategic Knowledge Tools require explanatory power. Fuzzy logic provides this. 1. Knowledge - What is it? A successful business makes good decisions, implements them well - and then learns from the experience in order to do better next time. To make a good decision, one needs not only information about the specific instance, but also an understanding of the domain. In other words, one needs a set of principles, models, templates or other abstractions. These abstractions are then re-usable for making new decisions with different information. Knowledge is re-usable - unlike information which relates to specific instances.  Knowledge is a set of re-usable abstractions that assist understanding and provide meaning to decision-making.  Information is about specific instances and is the raw material of particular decisions. For instance: Consider a civil engineering business that builds bridges. Its knowledge is in its understanding of how to build bridges, how to manage projects, how to handle finance etc. This knowledge is re-usable. Its information is about specific bridges, budgets, suppliers etc which are essentially transitory. If it knows how to build bridges but has no information about particular...

Words: 1010 - Pages: 5

Premium Essay

Costing

...COST ACCOUNTING II MARGINAL COSTING AND DECISION MAKING Prepared by Teddy Ossei Kwakye Lesson Objectives Distinguish between relevant and irrelevant revenues and costs Analyze relevant costs and indicate how they differ under alternative decision scenarios Apply differential analysis to decision scenarios, including discontinuation decisions; to accept a special order; to make or buy and to sell or further process a product Allocate limited resources for purposes of maximizing short-run profit Decision Making Process Objectives Setting • Relates to the future, hence decisions are future oriented Determination of Alternatives • Different alternatives to achieving the objectives, hence decision is a choice of alternatives Evaluating the alternatives • Requires complete, timely, relevant and reliable information Choosing the best alternative • Alternative chosen should be the one that maximizes the objectives Relevant Information Information that is affected by a decision • Information that is independent or has nothing to do with decision is irrelevant Types / Kinds • Quantitative information - Elements that can be expressed in monetary terms • Qualitative information - Factors that are difficult to quantify in monetary terms e.g. moral of employees, customer goodwill etc. Quantitative Relevant Information Relevant Costs and Revenues • Costs (revenues) that flow from the decision • Future or expected costs (revenues) • Must...

Words: 3197 - Pages: 13

Premium Essay

Critical Thinking

...based on facts and observations. Critical thinkers carefully analyze and evaluate information to probe for faulty and poor reasoning (Epstein 2006). When individuals use effective critical thinking skills and processes, they draw valid inferences based on accurate evidence and well-supported claims (Epstein 2006). Mastering critical thinking skills will allow you to take greater advantage of the opportunities provided by your constitutional rights; you will be able to more fully and effectively use the precious rights of free expression and suffrage granted by the U.S. Constitution (Epstein 2006). You will be able to "become wise" by listening to and reading about "all that can be said" against your views and by subjecting your ideas to others' perspectives. We make decisions every day, from deciding what to have for breakfast to deciding where to go to college. We need to be critical thinkers in the everyday and more unique problems we face. We need to ask questions, find and evaluate relevant information, and use information to make reasonable decisions. Also, we get fulfillment from the discovery and creativity involved in critical thinking. Working for Fedex you apply your critical thinking skills everyday of your job. As a Linehaul supervisor my job is very important and very vital to making the correct business decision that can make you or break you. In Linehaul the responsibilities are making sure that the road drivers...

Words: 856 - Pages: 4

Premium Essay

The Use of Accounting Information

...THE USE OF ACCOUNTING INFORMATION AND DECISION-MAKING IN ORGANISATION (A CASE STUDY OF MUXOL PAINT DEPORT, BENIN CITY) BY DAVID UYIGUE UNAD/ACC5/2007/371 A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING, FACULTY OF MANAGEMENT SCIENCE, UNIVERSITY OF ADO-EKITI, NIGERIA. IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE (B.sc) DEGREE (HONS.) IN ACCOUNTING FEBRUARY, 2014 CERTIFICATION This is to certify that this project work was written by DAVID UYIGUE of Department of Accounting, Faculty of Management Sciences, University of Ado – Ekiti State, under my supervision. ------------------------------ ------------------------------ DR KEMI OGUNDANA DATE (Project Supervisor) ----------------------------- ------------------------------ DR. OGUNDELE J.F. DATE (Degree Coordinator) DEDICATION This project work is dedicated to God Almighty, through His only begotten son, Jesus Christ for His Faithfulness and mercy. This project is also dedicated to the family of Mrs. Veronica Uyigue for their financial support. ACKNOWLEDGEMENTS First and foremost, I will like to acknowledge and appreciate Almighty God who saw me through my course of study and granted me the grace to complete this project work. through His only begotten son, Jesus Christ and His Faithfulness and mercy. My profound gratitude goes to my able project supervisor Dr...

Words: 7618 - Pages: 31

Premium Essay

Reccomendation Brief for an Internal Audit

...Auditor Jennifer Perkins December 9, 2013 ACC 544 Tracie Youngblood An internal auditor certifies a company’s financial statements are timely, relevant, and reliable. According to the American Accounting Association (1973), “Auditing is a systematic process of objectivity obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users.” Internal auditing assists a company minimize business risks by satisfying the demand of timely, relevant, and reliable information. The following are four environmental conditions that increase user demand for relevant and reliable information: (1) Complexity, (2) Remoteness, (3) Time sensitivity, and (4) Consequences. Complexity Currently, transactions and events are far more complex, in a way that decision makers and investors do not have the expertise to handle them. However, a professional such as an internal auditor is trained to accumulate, gather, and sum up the crucial operating information on his or her own. An internal auditor has the expertise to break down the complex transactions and events while making that information more understandable for the decision making process. Remoteness Decision makers and potential partners are often separated by distance, time, and a lack of expertise. Depending on the distance and time, investors cannot continually check...

Words: 626 - Pages: 3

Premium Essay

Ethics

...DecisionMaking Framework Guide & Worksheets 1 The IDEA: Ethical Decision-Making Framework builds upon the Toronto Central Community Care Access Centre Community Ethics Toolkit (2008), which was based on the work of Jonsen, Seigler, & Winslade (2002); the work of the Core Curriculum Working Group at the University of Toronto Joint Centre for Bioethics; and incorporates aspects of the accountability for reasonableness framework developed by Daniels and Sabin (2002) and adapted by Gibson, Martin, & Singer (2005). Introduction Ethics is about making “right” or “good” choices and the reasons that we give for our choices and actions. Ethics promotes reflective practice in the delivery of health care. Ethics addresses the question “What should we do and why?” Another way to describe ethics is as follows. It is about: • Deciding what we should do – what decisions are morally right or acceptable; • Explaining why we should do it – justifying our decision using language of values and principles; and • Describing how we should do it – outlining an appropriate process for enacting the decision. 2 Ethical issues arise every day in health care (See Appendix A). Everyone has a role to play in ensuring the ethical delivery of care, from bedside to boardroom. Trillium Health Centre is committed to providing quality compassionate care to the community it serves. Ethical principles and values are incorporated into the way that decisions are made and care is delivered every day. Accreditation Canada...

Words: 3991 - Pages: 16

Premium Essay

Cmi 5002 Information Based Decision Making

... | Unit 5002 – Information based decision making Assignment 1. Explain and provide examples of the differences between data and information, and describe at least three different sources of management data and information. Prepare a chart to evaluate the benefits and possible drawbacks of each source of information in terms of its usefulness in helping managers to make sound business decisions. Describe the selection criteria you would apply to ensure the quality and integrity of the data and information you use for decision-making. Give reasons for each selection criteria. This covers assessment criteria: 1. Examine the nature of data and information 2. Evaluate relevant sources of data and information 3. Discuss the criteria for selection of data and information Guideline word count: 450 - 500 1.1 Examine the nature of data and information Data can be described as facts and figures which relay something specific but that are raw and still need to be processed and organised. Data can be classified as either quantitative (numerical) or qualitative (descriptive), both have a distinct purpose and use. Once data has been processed, organized, structured or presented in a given context so as to make it understandable and useful, it can be classified as information. When planning or carrying out a decision-making process, besides data and information, it is also important to consider knowledge....

Words: 1413 - Pages: 6

Premium Essay

The Concepts of Accounting and Qualities of Accounting Information

...ACCOUNTING INFORMATION A) Accounting is the process of identifying, recording, classifying, summarizing and evaluating information’s that can be measured in monetary terms for accurate communication of these economic events through proper presentation and interpretation for users of the information to make a favorable decision. However for accounting to achieve its objective, than the carried information should have certain qualities and six of them are explained with example below; 1. Accounting information must be relevant. The information must be essential to users to predict future possible outcomes. Relevant information should inform the users the financial performance of the entity to make accurate decisions. However, if the information limits users to know the financial performance of the entity to for tile future happening than the information has failed it relevant. For example if net income and its associates confirm investors predictive about future cash generation ability then the net income has feedback value for investors making it a relevant information. 2. Accounting information must be reliable. A quality business decision making is positively related to reliability of accounting information. The information can be reliable if it is verifiable and is natural. Verifiable means the information should prove be-young doubt by showing clearly income and expenses posted to the accounting general ledges for accurate outcomes. The information should also...

Words: 964 - Pages: 4