Chapter 14 - Decision making: Relevant costs and benefits. After completing this chapter, you should be able to: Describe seven steps in the decision-making process and the managerial accountant’s role in that process; explain the relationship between quantitative and qualitative analyses in decision making; list and explain two criteria that must be satisfied by relevant information;. | Decision Making: Relevant Costs and Benefits Chapter 14 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 1 Chapter 14. Decision Making: Relevant Costs and Benefits The Decision-Making Process 1. Clarify the Decision Problem 2. Specify the Criterion 3. Identify the Alternatives 4. Develop a Decision Model 5. Collect the Data 6. Make a Decision Primarily the responsibility of the managerial accountant. Information should be: 1. Relevant 2. Accurate 3. Timely 14- 4 4 Accounting data is typically kept in quantitative measures, and, is important in the decision–making process. Managers must use their skills, their judgment and their ethics to make difficult decisions. While involved in all stages of the decision-making process, the managerial accountant’s primary role is to provide quantitative data and analysis that are relevant, accurate and timely to the decision being made. The | Decision Making: Relevant Costs and Benefits Chapter 14 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 1 Chapter 14. Decision Making: Relevant Costs and Benefits The Decision-Making Process 1. Clarify the Decision Problem 2. Specify the Criterion 3. Identify the Alternatives 4. Develop a Decision Model 5. Collect the Data 6. Make a Decision Primarily the responsibility of the managerial accountant. Information should be: 1. Relevant 2. Accurate 3. Timely 14- 4 4 Accounting data is typically kept in quantitative measures, and, is important in the decision–making process. Managers must use their skills, their judgment and their ethics to make difficult decisions. While involved in all stages of the decision-making process, the managerial accountant’s primary role is to provide quantitative data and analysis that are relevant, accurate and timely to the decision being made. The Decision-Making Process 1. Clarify the Decision Problem 2. Specify the Criterion 3. Identify the Alternatives 4. Develop a Decision Model 5. Collect the Data 6. Make a Decision Qualitative Considerations 14- 7 7 Qualitative characteristics are the factors in a decision problem that cannot be expressed effectively in numerical terms. Sometimes, a decision can be made that goes against the quantitative analysis, because the effect on the company, their employees, or their customers would be negative. The Decision-Making Process 1. Clarify the Decision Problem 2. Specify the Criterion 3. Identify the Alternatives 4. Develop a Decision Model 5. Collect the Data 6. Make a Decision Relevant Pertinent to a decision problem. Accurate Information must be precise. Timely Available in time for a decision 14- 4 4 A managerial accountant might ask, “What sort of information should the accountant gather?” Information that is useful to a decision has some common characteristics. The .
