Kế toán, kiểm toán - Kế toán, kiểm toán - Short - Term decision making

Short-term Decision MakingCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin4-*What is the CVP Model?Cost-volume-profit model (short-term)Use to explore relationships among costs, volumes, and profitsAssumptions (linearity)Selling price is constant per unitVariable cost is constant per unitFixed cost is constant in totalNumber of units produced = number of units sold4-*CVP GraphBreakeven pointLoss areaProfit areaUnits produced and sold$Total RevenueTotal Cost4-*How are the CVP Components Defined Mathematically?Total revenue = SP * QTotal cost = VC * Q + FCBreakeven = (SP * Q – VC * Q) – FC = 0Where, Q = quantity produced and soldContribution marginSP – VCBreakeven = CM * Q – FC = 0Target profit before taxesCM * Q – FC = PTarget profit after taxesCM * Q – FC = P/(1 – tax rate) 4-*CVP ContinuedChange in selling priceIncrease—decreases breakevenDecrease—increases breakevenChange in variable costIncrease—increases breakevenDecrease—decreases breakevenChange in fixed costIncrease—increases breakevenDecrease—decreases breakevenChange in tax rateNo impact on breakeven4-*What are Product and Nonproduct Costs?Product costsIncurred in connection with buying or making the productNonproduct costsIncurred in connection with selling the product and administering (running) the company4-*What are the 3 Types of Product Costs?Direct materialsTraceableWorth the cost of tracingDirect laborCost of employees making the productManufacturing overheadIndirect costs of production (indirect materials, indirect labor, and other manufacturing costs)4-*What are the Activity Levels Associated with Costs?Unit-relatedVary with units produced or soldBatch-relatedVary with batches (groups) regardless of the number of units in the batchProduct-sustainingVary with the number of product linesFacility-sustainingFixed or capacity costs4-*Types and Activity LevelsProductNonproductUnit-relatedMaterialsCommissionsBatch-relatedSet upsOrderingProduct-sustainingResearch & developmentAdvertisingFacility-sustainingRental of equipmentCEO salary4-*What are the 2 Characteristics of a Relevant Variable?FutureThe variable must occur in the futureDifferentThe variable must differ between the alternatives considered4-*Relevant Variables ContinuedSunk costsPast, irrelevant for decision makingOpportunity costsBenefits foregone, relevant for decision makingIncremental costs/revenuesAdditional cost/revenue, relevant if different between alternatives4-*What are the Types of Short-Term Decisions Considered?Accept-or-reject decisionsSpecial orderBase decision on incremental profit from the orderMake-or-buy decisionsOutsourcingBase decision on cost comparison between make and buyKeep-or-drop decisionsProduct mixBase decision on revenues lost versus costs saved