After completing this chapter you should be able to: Indicate the steps in management’s decision-making process, describe the concept of incremental analysis, identify the relevant costs in accepting an order at a special price, identify the relevant costs in a make-or-buy decision,.and other contents. | CHAPTER 26 INCREMENTAL ANALYSIS AND CAPITAL BUDGETING Accounting Principles, Eighth Edition Study Objectives Indicate the steps in management’s decision-making process. Describe the concept of incremental analysis. Identify the relevant costs in accepting an order at a special price. Identify the relevant costs in a make-or-buy decision. Give the decision rule for whether to sell or process materials. 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Study Objectives – Continued Identify the factors to consider in retaining or replacing equipment. Explain the relevant factors in whether to eliminate an unprofitable segment. Determine which products to make and sell when resources are limited. Contrast annual rate of return and cash payback in capital budgeting. Distinguish between the net present value and internal rate of return methods. 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Preview of Chapter An important purpose of management accounting is to provide managers with relevant information for decision making. Considers uses of incremental analysis and capital budgeting in management’s decision making .
