evaluate possible courses of action. 2. In making decisions, management ordinarily considers both financial and nonfinancial information. 3. In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain constant. 4. Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives. 5. Decision-making
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evaluate possible courses of action. 2. In making decisions, management ordinarily considers both financial and nonfinancial information. 3. In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain constant. 4. Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives. 5. Decision-making
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Marginal Cost Based Pricing in Transport Key Implementation Issues from the Economic Perspective Erik Verhoef, Free University Amsterdam Paper prepared for IMPRINT 1. Introduction Marginal cost pricing in transport is a ‘hot’ topic, in at least two senses. First, as is well known, over the last decade(s), sophisticated pricing policies in transport have evolved from a primarily academic, theoretical construct, to a realistic and seriously considered option for many areas – urban and non-urban
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option will either minimize costs or maximize gains. In the business world, managers make these decisions based on evaluating the effect of the differential costs – the difference between the two options. From data generated from a firm’s cost-accounting system, managers can apply the rules of cost behavior to determine which cost factors are relevant to taking the best course of action. In one case, the difference between costs might be evaluated. In another case, both costs and revenues may be evaluated
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COST CLASSIFICATION AND BEHAVIOUR. Cost: Reflects a monetary measure of the resources sacrificed or forgone to achieve a benefit such as acquiring a good or service. The term has multiple meanings: Different types of costs are used in different situations. Costs are developed and used for some specific purposes. The way a cost is used is to be used will define the way it should be computed. Cost Object: Any activity for which a separate measurement of cost is required. Something for which we want
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CHAPTER 3: COST ANALYSIS Multiple Choice b 1. The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram method a. includes costs outside the relevant range. b. considers more than two points. c. can be used with more types of costs than the high-low method. d. gives a precise mathematical fit of the points to the line. a 2. The major objective of preparing a scatter-diagram is to a
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presented by revenues. For example, if our sales increase dramatically, a flexible budget lets us increase our advertising or promotions. 2) It’s important to understand our manufacturing and overhead costs in order to know true costs of sales. A flexible budget recalculates production and overhead costs based on sales data or units sold. We can review these numbers each month to determine which of our products provides the best profit margins, and whether it’s effective to keep producing them. 3)
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valves, connectors, and fixtures used in commercial and residential plumbing applications. Recently a senior manager walked into the cost accounting department and asked Nick Somner to tell her the cost of the D45 valve. Nick quickly replied, “why do you want to know?” Noticing that the manager appeared somewhat startled by this question, he explained, “The cost information you need depends on the decision you’re going to make. You might be thinking of increasing a scheduled production run of 3000
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Types of Responsibility Centers Cost Centers Profit Centers Investment Centers The content and organization chart of Chapter 10 Learning Objectives Describe the concept of budgetary control. Evaluate the usefulness budget reports. of static Explain the development of flexible budgets and the usefulness of flexible budget reports. Describe the concept of responsibility accounting Indicate the features of responsibility reports for cost centers. Identify the content of
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questions 1/ Establish the full cost of the order on a cost centre (departmental) basis and state any assumptions that you have made in deriving this figure. You are highly recommended to: a/ list the direct and indirect costs related to the specific cost unit involved in this case study; and identify the basis of cost apportionment for each overhead cost; b/ identify the cost centres (what relevant distinction can you establish?) and apportion overheads to the relevant cost centres; c/ deduce overhead
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