Chapter 23 - Relevant costing for managerial decisions. After you have read this chapter you should be able to: Describe the importance of relevant costs for short-term decisions, evaluate short-term managerial decisions using relevant costs, determine product selling price based on total costs, identify relevant costs and apply them to managerial decisions,. | Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 23 Relevant Costing for Managerial Decisions Conceptual Learning Objectives C1: Describe the importance of relevant costs for short-term decisions. 23- A1: Evaluate short-term managerial decisions using relevant costs. A2: Determine product selling price based on total costs. Analytical Learning Objectives 23- P1: Identify relevant costs and apply them to managerial decisions Procedural Learning Objectives 23- Decision making involves five steps: Define the task and the goal. Identify alternative actions. Collect relevant information on alternatives. Select the course of action. Analyze and assess decision. Decision Making C 1 23- Costs that are applicable to a particular decision. Costs that should have a bearing on which alternative a manager selects. Costs that are avoidable. Future costs that differ between alternatives. 1 2 Relevant Costs C 1 23- All costs incurred in the past that cannot be changed by any decision made now or in the future. Sunk costs should not be considered in decisions. Classification by Relevance: Sunk Costs Example: You bought an automobile that cost $10,000 two years ago. The $10,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the $10,000 cost. C 1 23- Future outlays of cash associated with a particular decision. Example: Considering the decision to take a vacation or stay at home, you will have travel costs (out-of-pocket costs) only if you choose a vacation. Classification by Relevance: Out-of-Pocket Costs C 1 23- The potential benefit that is given up when one alternative is selected over another. Example: If you were not attending college, you could be earning $20,000 per year. Your opportunity cost of attending college for one year is $20,000. Classification by Relevance: . | Financial and Managerial Accounting Wild, Shaw, and Chiappetta Fourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 23 Relevant Costing for Managerial Decisions Conceptual Learning Objectives C1: Describe the importance of relevant costs for short-term decisions. 23- A1: Evaluate short-term managerial decisions using relevant costs. A2: Determine product selling price based on total costs. Analytical Learning Objectives 23- P1: Identify relevant costs and apply them to managerial decisions Procedural Learning Objectives 23- Decision making involves five steps: Define the task and the goal. Identify alternative actions. Collect relevant information on alternatives. Select the course of action. Analyze and assess decision. Decision Making C 1 23- Costs that are applicable to a particular decision. Costs that should have a bearing on which alternative a manager selects. Costs that are avoidable. Future .
