short-run decision analysis 27. short-run decision analysis and the management process objective 1:...
TRANSCRIPT
![Page 1: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/1.jpg)
Short-Run Decision Analysis27
![Page 2: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/2.jpg)
Short-Run Decision Analysis and the Management Process
OBJECTIVE 1: Descibe how managers make short-run decisions using incremental analysis.
![Page 3: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/3.jpg)
Exhibit 1: Incremental Analysis
![Page 4: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/4.jpg)
Short-Run Decision Analysis and the Management Process
• Short-run decision analysis is the systematic examination of any decision whose effects will be felt over the course of the next year– Discuss the quantitative information and
qualitative information that are important in making short-run decisions.
![Page 5: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/5.jpg)
Short-Run Decision Analysis and the Management Process
• When performing short-run decision analysis in the planning stage of the management process, managers– Discover a problem or need. – Identify alternative ways of solving the
problem or meeting the need.
![Page 6: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/6.jpg)
Short-Run Decision Analysis and the Management Process
• When performing short-run decision analysis in the planning stage of the management process, managers (cont.)– Analyze the effects of each solution.– Select the best course of action.
![Page 7: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/7.jpg)
Short-Run Decision Analysis and the Management Process
• During the year, managers make many decisions that affect their organization’s profitability and liquidity in the short run.
![Page 8: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/8.jpg)
Short-Run Decision Analysis and the Management Process
• Incremental analysis in making short-run decisions– Irrelevant costs and revenues
• Differential cost or incremental cost
– Incremental analysis• Sunk cost
– Opportunity costs
![Page 9: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/9.jpg)
©2011 Cengage Learning All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
![Page 10: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/10.jpg)
Incremental Analysis for Outsourcing Decisions
OBJECTIVE 2: Perform incremental analysis for outsourcing decisions.
![Page 11: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/11.jpg)
Exhibit 2: Incremental Analysis: Outsourcing Decision
![Page 12: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/12.jpg)
Incremental Analysis for Outsourcing Decisions
• Outsourcing decisions.– Strong candidates include payroll processing,
training, managing vehicle fleets, sales and marketing, custodial services, and information management.
![Page 13: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/13.jpg)
Incremental Analysis for Outsourcing Decisions
• Outsourcing decisions. (cont.)– Outsourcing can reduce a company’s
investment in physical assets and human resource, which can improve cash flow.
– Exhibit 2 provides an example of incremental analysis of an outsourcing decision.
![Page 14: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/14.jpg)
©2011 Cengage Learning All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
![Page 15: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/15.jpg)
Incremental Analysis for Special Order Decisions
OBJECTIVE 3: Perform incremental analysis for special order decisions
![Page 16: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/16.jpg)
Exhibit 3: Incremental Analysis: Special Order Decision
![Page 17: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/17.jpg)
Incremental Analysis for Special Order Decisions
• Decision to accept or reject a special order.– Special order analysis– Incremental analysis for special order decisions
generally ignores fixed costs.
![Page 18: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/18.jpg)
Incremental Analysis for Special Order Decisions
• Decision to accept or reject a special order. (cont.)– Price and relevant cost comparison.– Minimum bid price for special order.
![Page 19: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/19.jpg)
©2011 Cengage Learning All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
![Page 20: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/20.jpg)
Incremental Analysis for Segment Profitability Decisions
OBJECTIVE 4: Perform incremental analysis for segment profitability decisions
![Page 21: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/21.jpg)
Exhibit 4: Incremental Analysis: Segment Profitability Decision
![Page 22: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/22.jpg)
Exhibit 4: Incremental Analysis: Segment Profitability Decision
![Page 23: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/23.jpg)
Incremental Analysis for Segment Profitability Decisions
• Segment profitability decisions– A segment margin is a segment’s sales revenue
minus direct cost• Positive segment margin: segment’s revenue is
greater than its direct costs.
• Negative segment margin: segment’s revenue is less than its direct costs
![Page 24: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/24.jpg)
Incremental Analysis for Segment Profitability Decisions
• Segment profitability decisions (cont.)– Includes preparation of segmented income
statement using variable costing to identify variable and fixed costs.
• Direct fixed costs are traceable to the segment.
• Common costs are the remaining costs and are not assigned to segments.
![Page 25: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/25.jpg)
©2011 Cengage Learning All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
![Page 26: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/26.jpg)
Incremental Analysis for Sales Mix Decisions
OBJECTIVE 5: Perform incremental analysis for sales mix decisions involving constrained resources.
![Page 27: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/27.jpg)
Exhibit 5: Incremental Analysis: Sales Mix Decision Involving Constrained Resources
![Page 28: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/28.jpg)
Exhibit 5: Incremental Analysis: Sales Mix Decision Involving Constrained Resources
![Page 29: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/29.jpg)
Incremental Analysis for Sales Mix Decisions
• Sales mix decision.– Steps involved in the decision analysis:
• For each product affected by the scarce resource, calculate the contribution margin per unit by subtracting the variable costs per unit from the selling price.
![Page 30: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/30.jpg)
Incremental Analysis for Sales Mix Decisions
• Sales mix decision.– Steps involved in the decision analysis: (cont.)
• For each product, calculate the contribution margin per unit of the scarce resource (such as machine hours) by dividing the contribution margin per unit by the quantity of the scarce resource required per unit.
![Page 31: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/31.jpg)
Incremental Analysis for Sales Mix Decisions
• Sales mix decision. (cont.)– The alternative that maximizes the contribution
margin per scarce resource is the one that should be selected.
![Page 32: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/32.jpg)
©2011 Cengage Learning All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
![Page 33: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/33.jpg)
Incremental Analysis for Sell or Process- Further Decisions
OBJECTIVE 6: Perform incremental analysis for sell or process-further decisions.
![Page 34: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/34.jpg)
Exhibit 6: Incremental Analysis: Sell or Process-Further Decision
![Page 35: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/35.jpg)
Incremental Analysis for Sell or Process- Further Decisions
• Incremental analysis of sell or process-further decisions.– Managers compare the incremental costs and
revenues of selling a joint product at the split-off point with the incremental costs and revenues of processing it further.
![Page 36: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/36.jpg)
Incremental Analysis for Sell or Process- Further Decisions
• Incremental analysis of sell or process-further decisions.– Only costs that occur after the split-off point
are relevant.– A product should be processed further only if
the incremental revenues generated exceed the incremental costs incurred.
![Page 37: Short-Run Decision Analysis 27. Short-Run Decision Analysis and the Management Process OBJECTIVE 1: Descibe how managers make short-run decisions using](https://reader034.vdocuments.us/reader034/viewer/2022051018/56649e725503460f94b71267/html5/thumbnails/37.jpg)
©2011 Cengage Learning All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.