© 2007 Pearson Education Canada Slide 8-1 Relevant Information and Decision Making: Marketing Decisions 8.

Slides:



Advertisements
Similar presentations
Absorption Costing and Activity Based Costing
Advertisements

Pricing Strategies the price is what you pay, the value is what you receive…anonymous.
Cost-Volume-Profit Relationships
Capacity Planning. How much long-range capacity is needed When more capacity is needed Where facilities should be located (location) How facilities should.
Incremental Analysis for Short-Term Decision Making
McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Eleven Cost Behavior, Operating Leverage, and CVP Analysis.
Sell Or Process Further Joint Products Decision
2009 Foster School of Business Cost Accounting L.DuCharme 1 Decision Making and Relevant Information Chapter 11.
Short-term Capacity Optimization
10-1 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Tactical Decision Making 12 PowerPresentation® prepared by David J. McConomy, Queen’s.
Pricing: Understanding and Capturing Customer Value
Fundamentals of Cost Analysis for Decision Making
Cost-Revenue Analysis for Decision Making
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fifth Edition Wild, Shaw, and Chiappetta Fifth Edition McGraw-Hill/Irwin Copyright © 2013.
Decision Making and Relevant Information
9 - 1 ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 9 Relevant Information and.
Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Appendix B Profitability Analysis.
©2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton Relevant Information and Decision.
13 Relevant Costs for Decision Making Chapter Future revenues or costs that differ among alternatives. Is the cost of equipment purchased in the past relevant?
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
Pricing Decisions EMBA 5411 Budgeting and Pricing.
© 2002 Pearson Education Canada Inc. Slide 8-1 Relevant Information and Decision Making: Marketing Decisions 8.
Fundamentals of Cost Analysis for Decision Making Chapter 4 Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.
Decision-Making. learning objectives the scope of decision-making the seven steps of the decision-making process relevant costs examples of practical.
1 Bruce Bowhill University of Portsmouth ISBN: © 2008 John Wiley & Sons Ltd.
Chapter Thirteen Short-Run Decision Making: Relevant Costing COPYRIGHT © 2012 Nelson Education Ltd.
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13 Cost Management and Decision Making.
Copyright © 2003 Pearson Education Canada Inc. Slide Chapter 11 Decision Making and Relevant Information.
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. Relevant Costs for Short-Term Decisions Chapter 8 1.
Differential Analysis: Key to Decision Making. Incremental Analysis A technique used in decision analysis that compares alternatives by focusing on the.
ACCT 2302 Fundamentals of Accounting II Spring 2011 Lecture 17 Professor Jeff Yu.
Accounting Principles, Ninth Edition
Financial and Managerial Accounting John J. Wild Third Edition John J. Wild Third Edition McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Management Accounting: Information for managing and creating value 4e Slides prepared by Kim Langfield-Smith.
Managerial Accounting by James Jiambalvo
Chapter 26 Part 1.
Relevant Cost Decisions DECISION MAKING IN THE SHORT TERM.
© 2012 Pearson Prentice Hall. All rights reserved. Decision Making and Relevant Information.
Topic 3 Relevant Costing and Contribution Analysis.
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.
5 - 1 ©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 5 Relevant Information and.
Objective 1 Define Opportunity Cost and Use it to Analyze the Income Effects of a Given Alternative
Chapter 25 Short-Term Business Decisions
9 Differential Analysis and Product Pricing Managerial Accounting 13e
Do you agree that the cost benefit rule conflicts with our traditional principles of “never give up” and “go for it”? 1.Yes 2.No.
AS Business Studies Marketing
Chapter 17 Pricing and product mix decisions. Major influences on pricing decisions §Customer demand and reactions §Competitor behaviour §Costs l price.
© 2012 McGraw-Hill Education (Asia) Profitability Analysis Appendix B.
Short-Run Decision Making; Relevant Costing and Inventory Management Management Accounting: The Cornerstone for Business Decisions Copyright ©2006 by South-Western,
Differential Analysis and Product Pricing Chapter 12.
AC239 Managerial Accounting Seminar 9 Jim Eads, CPA, MST, MSF Differential Analysis and Product Pricing 1.
Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011.
© 2012 Pearson Prentice Hall. All rights reserved. Using Costs in Decision Making Chapter 3.
Relevant Costs For Decision Making Mark Fielding-Pritchard mefielding.com 1.
Don R. Hansen Maryanne M. Mowen
1 Chapter 16 Relevant Costs and Benefits for Decision Making.
© 1999 Prentice-Hall Canada Inc. Slide 31 Optimal Use of Limited Resources when something constrains or limits operations (labour hours, machine hours,
Crosson Needles Managerial Accounting 10e Short-Run Decision Analysis 9 C H A P T E R © human/iStockphoto ©2014 Cengage Learning. All Rights Reserved.
5 - 1 Chapter 5 Relevant Information and Decision Making: Marketing Decisions.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Pricing Decisions and Cost Management Chapter 12.
Chapter 19 Information for tactical decisions 19-1 Copyright  2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith.
Prepared by Diane Tanner University of North Florida ACG Incremental Analysis 3-1.
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13 Cost Management and Decision Making.
Copyright © 2008 Prentice Hall All rights reserved 8-1 Short-Term Business Decisions Chapter 8.
Relevant Cost Decisions
Decision Making: Relevant Costs and Benefits
© 2017 by McGraw-Hill Education
Relevant Information and Decision Making: Marketing Decisions
© 2017 by McGraw-Hill Education
Presentation transcript:

© 2007 Pearson Education Canada Slide 8-1 Relevant Information and Decision Making: Marketing Decisions 8

© 2007 Pearson Education Canada Slide 8-2 Relevant Costs and Revenues Relevant Costs or Revenues The predicted future costs or future revenues that differ among the alternatives being considered Historical costs are not by themselves relevant; historical data are useful only in that they may help predict future events Examples: special sales orders, deleting / adding products or departments, optimal use of limited resources, make of buy decisions, sell or process further decisions

© 2007 Pearson Education Canada Slide 8-3 Accuracy and Relevance Ideally one would like relevant and accurate information However decision makers must weigh the extra cost of obtaining more accurate information, against the benefit which the increased accuracy offers

© 2007 Pearson Education Canada Slide 8-4 Decision Process and Role of Information Historical Information Other Information Prediction Method Decision Model Implementation & Evaluation Feedback Collect relevant information Use the information as a basis for predicting the future Make a decision based on the quantitative and qualitative information Chosen action is implemented and evaluation of performance is main source of feedback

© 2007 Pearson Education Canada Slide 8-5 Special Sales Order special one-time order from a customer at a reduced price WithNoSpecial Order Relevant revenue: $13.00$1,300,000$0 Relevant costs: $12.00(1,200,000)0 Incremental income$100,000$0

© 2007 Pearson Education Canada Slide 8-6 Deleting or Adding Products or Departments special decision to add or delete a product line or department KeepDrop GroceryGroceryDifference Relevant revenue:$1,900$1,000$900 Relevant costs: Variable costs1, Fixed costs (avoidable) Incremental income$215$50$165

© 2007 Pearson Education Canada Slide 8-7 Optimal Use of Limited Resources when something constrains or limits operations labour hours, machine hours, raw material, space determine contribution margin per the limiting factor allocate usage to maximum profit SilverGold Contribution margin per unit$12.00$27.00 Units per hour3010 Contribution margin per hour$360.00$ allocate capacity to “Silver” up to expected demand, and then allocate remaining capacity to “Gold”

© 2007 Pearson Education Canada Slide 8-8 Pricing Decisions Price is a function of cost elasticity of demand competitors actions marketing considerations business strategy When relating cost to price always consider the diversity in costs among the various products Variable Costs Variable Costs Contribution Approach Absorption Approach Mark-Up 52.67% Fixed Costs Mark-Up 5.26%

© 2007 Pearson Education Canada Slide 8-9 Target Pricing & Target Costing Traditional Approach Determine costs and add on a mark-up to set selling prices Target Costing and Target Pricing First determine the price at which the product will sell Then design a product to be produced at a low enough cost to provide an adequate profit margin over target cost Target Price Target Costs + Mark-Up = Price - Margin =

© 2007 Pearson Education Canada Slide 8-10 “Cost-Plus” Often the basis for target prices The size of the “plus” depends on target (desired) operating outcomes Target prices can be based on a host of different markups based on a host of different definitions of cost There are many ways to arrive at the same target price