Ch5. Non-routine Operating Decisions Flashcards
part of day-to-day operations and follow established protocols and procedures; they are typically low-risk and require minimal analysis
examples: ordering office supplies, scheduling meetings, or assigning work tasks to team members
routine or operational decisions
medium term decisions that align with overall organizational strategy; they required careful analysis and consideration of various factors
examples: launching a new product line, revising marketing strategies, or adjusting pricing structures.
tactical decisions
long-term decisions that shape the direction and visions of the organization; they have a significant impact on the overall success growth of the company.
examples: expanding into new markets, acquiring other companies, or diversifying products and services
strategic decisions
Types of Decision-making in Management
- routine or operational decisions
- tactical decisions
- strategic decisions
Time-effects
- strategic
- tactical
- long term
- mediums/short term
concerned management level
- strategic
- tactical
- top executives
- middles and supervisory managers
primary interest served
- strategic
- tactical
- financial investors
- customers
focus
- strategic
- tactical
- stability and growth
- profitability and liquidity
Management accounting techniques used
- strategic
- tactical
- capital budgeting
- std costing, responsibility acctg, short-term budgeting, cost-volume profit analysis, variance analysis, nonroutine operating decisions.
- a choice made to deal with a non-repetitive, tactical situations
- these decisions typically involve situations that fall outside of the operating procedures off a business
non-routine operating decisions
- non-routine operating decisions use of
- relevant costing,
- sometimes referred to relevant costing, incremental costing or differentials costing
present in one alternative but absent in whole or in part in another another alternative
differential cost
can be eliminated in whole or in part when one alternative is chosen over another
avoidable
contribution to income that is lost when one action is taken over the next best alternative course of action
opportunity
list of relevant costs
- differential cost
- avoidable
- opportunity
change from one alternatives to another
differential or incremental
planned cost, budgeted cost, projected costs or estimated costs; costs that are yet to be incurred in the future.
future oriented
features of relevant costs
- differential or incremental
- future oriented
not relevant
sunk costs
the relevant costs of producing the products component are compared with the purchase price of buying it from an outside supplier; avoidable costs are considered depending
cost:
- variable manufacturing costs that will saved
- fixed cost that can be eliminated
- the purchase price
- opportunity costs or the potential benefits that may be obtained.
make or buy a product component
the relevant information is the difference between the variable manufacturing costs to produces the special order and expected revenues
accept or reject a special sales order
A business segment or product line should be continued if revenues exceed its costs (positive segment margin)
continue or drop a business segment`
the basic decisions rule is: sell it if the incremental revenue is from such processing exceed the incremental costs
sell-as-is or process further
is the level of operations where the loss from continuing is equal to the loss from discontinuing
shutdown point
if continuing the operations will result to greated sales than the shutdown point,it is better to continue operating
shut down or continue operations
offering a particular amount of money for something when competing against other people to buy it
bidding
should not be less than the incremental cost
minimum bid price
- when resources are limited (____) ___ ____ is about getting the most out of them.
- involves identifying, prioritizing, and utilizing resources in the most efficient and effective manner
scarce resources optimization
if the expected incremental sales is greater than the incremental cost of the keeping the product then _____
sell now or later
- the decision points involves the cash inflows and cash outflows resulting from ________
- immediate cash flow
replace or retain an asset
when products do not meet the standards specifications or are defective, the producers may sell them as a ____ or may opt to _____ or reprocess them to be sold later at a higher value
scrap or rework defective unit
- the point at which two different alternatives are equal
- whatever alternatives is chosen, the outcomes will be the same
indifference point
the level or points is known as _____ and at this points the total cost of two production methods is the same
cost indifference point
