Chapter 30 - Cost-revenue analysis for decision making. After reading this chapter, you should be able to: Explain the basic steps in the decision-making process, prepare income statements using the absorption costing and direct costing methods, using the contribution approach, analyze the profits of segments of a business,. | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Cost-Revenue Analysis for Decision Making Section 1: The Decision Process Chapter 30 Section Objectives Explain the basic steps in the decision-making process. Prepare income statements using the absorption costing and direct costing methods. Using the contribution approach, analyze the profits of segments of a business. Determine relevant cost and revenue data for decision-making purposes. In Chapter 30 section 1, we will explain the basic steps in the decision-making process; prepare income statements using absorption costing and direct costing methods; analyze profits of segments of a business using the contribution approach; and determine relevant cost and revenue data for decision-making purposes. Define the problem. Identify workable alternatives. Determine relevant cost and revenue data. Evaluate the cost and revenue data. Consider appropriate nonfinancial factors. Make a decision. | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Cost-Revenue Analysis for Decision Making Section 1: The Decision Process Chapter 30 Section Objectives Explain the basic steps in the decision-making process. Prepare income statements using the absorption costing and direct costing methods. Using the contribution approach, analyze the profits of segments of a business. Determine relevant cost and revenue data for decision-making purposes. In Chapter 30 section 1, we will explain the basic steps in the decision-making process; prepare income statements using absorption costing and direct costing methods; analyze profits of segments of a business using the contribution approach; and determine relevant cost and revenue data for decision-making purposes. Define the problem. Identify workable alternatives. Determine relevant cost and revenue data. Evaluate the cost and revenue data. Consider appropriate nonfinancial factors. Make a decision. The Decision-Making Process There are six steps involved in the decision making process. They are: Define the problem. Identify workable alternatives. Determine relevant cost and revenue data. Evaluate the cost and revenue data. Consider appropriate nonfinancial factors, and Make a decision. All manufacturing costs (variable and fixed) are included in the cost of goods manufactured. The value of ending inventory includes fixed costs. Absorption Costing Under absorption costing, all manufacturing costs are included in the cost of goods manufactured. Also, the value of ending inventory includes fixed costs. Fixed and variable manufacturing costs are included Income Statement Using Absorption Costing This example shows an income statement using absorption costing. Notice that fixed and variable manufacturing costs are included in the total cost of goods manufactured. Only variable costs are included in the cost of goods manufactured. Fixed manufacturing costs are charged to expense .
