(BQ) Part 2 book "Cost accounting - A managerial emphasis" has contents: Decision making and relevant information, pricing decisions and cost management, process costing, management control systems, transfer pricing, and multinational considerations, performance measurement, compensation, and multinational considerations,.and other contents. | ᭢ 11 Decision Making and Relevant Information How many decisions have you made today? Learning Objectives Maybe you made a big one, such as accepting a job offer. Or maybe your decision was as simple as settling on your plans for the weekend or choosing a restaurant for dinner. Regardless of whether decisions are significant or routine, most people follow a simple, logical process when making them. This process involves gathering information, making predictions, making a choice, acting on the choice, and evaluating results. It also includes deciding what costs and benefits each choice affords. Some costs are irrelevant. For example, once a coffee maker is purchased, its cost is irrelevant when deciding how much money a person saves each time he or she brews coffee at home versus buying it at Starbucks. The cost of the coffee maker was incurred in the past, and the money is spent and can’t be recouped. This chapter will explain which costs and benefits are relevant and which are not—and how you should think of them when choosing among alternatives. 1. Use the five-step decision-making process to make decisions 2. Distinguish relevant from irrelevant information in decision situations 3. Explain the opportunity-cost concept and why it is used in decision making 4. Know how to choose which products to produce when there are capacity constraints 5. Discuss factors managers must consider when adding or dropping customers or segments 6. Explain why book value of equipment is irrelevant in equipmentreplacement decisions 7. Explain how conflicts can arise between the decision model used by a manager and the performanceevaluation model used to evaluate the manager Relevant Costs, JetBlue, and Twitter1 What does it cost JetBlue to fly a customer on a round-trip flight from New York City to Nantucket? The incremental cost is very small, around $5 for beverages, because the other costs (the plane, pilots, ticket agents, fuel, airport landing fees, and baggage handlers)
