1. Relevant costs

2. Identifying relevant costs Future costs Cash flows Incremental costs Making Decision

3. Machinery user costs: Hire charges Resale value IRRELEVANT Depreciation: not a cash flow Purchase : a sunk cost( 沉没成本 )

4. Relevant cost of labour There is spare capacity and the salaried staff are paid anyway zero The staff are working to their contracted hours additional hours can be obtained, for example overtime or by hiring additional staff Current rate of pay Staff are fully utilised on existing work, and no additional hours can be obtained Direct labour cost plus variable overhead costs and contribution foregone

5. Relevant cost of materials Already in stock/Having decided to buy Not in stock Regularly used and need more Future/current purchase Not regularly used Alternative use scrapped Scrap/disposal value Higher of value in other use or scrap/disposal value Future/current purchase

6. Make or buy decisions

7. A make or buy decision, is the choice between making products in-house or purchasing them from an external supplier. The relevant costs are the differential costs between two options when there are no limiting factors restricting the in-house production capacity.

8. W X Y Z Production 1000 2000 4000 3000 Direct materials $4 $5 $2 $4 Direct labor $8 $9 $4 $6 Variable production overhead $2 $3 $1 $2 Incurred as a direct consequence of making W $ 1000 Incurred as a direct consequence of making X $ 5000 Incurred as a direct consequence of making Y $ 6000 Incurred as a direct consequence of making Z $ 8000 Other fixed costs (committed) $ 30000 $14 $17 $7$12 $ 50000

9. Further considerations a. Maximum use of spare capacity b. Hidden benefits from sub-contracting c. Possible dispute of losing work d. Reliability of sub-contractor e. Be flexible or control over f. Reliability of estimated fixed cost savings

10. Outsourcing

11. Outsourcing is the use of external suppliers for finished products, components or services. This is also known as contract manufacturing ( 合同制造 / 委约生产 ) or sub-contracting.

12. Why outsourcing? a. Specialist contractors can offer superior quality and efficiency. b. Outsourcing can free capital to invest it in core activities. c. Contractors have the capacity and flexibility to start production quickly to meet sudden variations in demand.( 合同商能快速应对需求的变化 ) d. There is not enough work to keep internal staff fully occupied.

13. Further processing decisions

14. To sell or to process further IR > IC IR < IC PROCESS further sell Joint products are two or more products which are output from the same processing operation,but which are indistinguishable from each other up to their point of separation. Joint costs are incurred before split-off point and they are therefore irrelevant to the further processing decision. 不管企业决定立即销售还是进一步加工, 联合成本已经发生并且不 可改变, 在决策分析中属于无关成本, 不必考虑. 关键在于分析联产品在加工后所增加的收入 incremental revenues 是否超过所追加的成本 incremental costs

15. Example （ P172. 4.2 ）： Incremental revenue= Total sales of Alashplus($3.25*60,000) – total sales of Alash ($1.25*100,000) =195,000 – 125,000=70,000 Incremental cost= Extra fixed costs($20,000)+variable cost （ 30c *100,000)=20,000+30.000=50,000 IR>IC ： 70,000-50,000=20,000 So it is $20,000 more profitable to process further into Alashplus.

16. Shut down decisions

17. Longer-term considerations : a.Saving in annual operating costs 运营成本的节约 b. Release unwanted non-current assets for sale 退出的固定资产的处置及可收回价值 c.Employees made redundant or relocated 员工的安置

18. short-run decisions based on short-run relevant costs 相对剩余生产能力不能转移 如果该亏损产品的单位贡献边际 >0 ，就可以继续生产，反之需要停产。因为继续生 产该产品，可以提供正的贡献边际，以补偿部分固定成本，继续生产可以使企业少 损失，若停产则根本无法弥补固定成本。 相对剩余生产能力可以转移 此时需要考虑机会成本。转移生产能力可以生产其他产品，生产的其他产品获得的 收益作为机会成本由亏损产品承担。如果亏损产品的贡献边际 > 转移剩余生产能力的 机会成本，就应该继续生产，否则应停产。 Example P175 5.2

19. 人 示 展 谢谢观赏 何宇晖 朱钰寒 赖琦