Академический Документы
Профессиональный Документы
Культура Документы
Incremental Analysis
Learning Objectives
After studying this chapter, you should be able to:
[1] Identify the steps in managements decision-making process.
[2] Describe the concept of incremental analysis.
[3] Identify the relevant costs in accepting an order at a special price.
[4] Identify the relevant costs in a make-or-buy decision.
[5] Identify the relevant costs in determining whether to sell or process materials
further.
[6] Identify the relevant costs to be considered in repairing, retaining, or replacing
equipment.
[7] Identify the relevant costs in deciding whether to eliminate an unprofitable
segment or product.
7-1
Preview of Chapter 7
Managerial Accounting
Sixth Edition
Weygandt Kimmel Kieso
7-2
7-3
Financial information
7-4
Non-financial information
The environment
7-5
7-6
Illustration 7-2
7-7
Relevant cost.
Opportunity cost.
Sunk cost.
7-8
7-9
7-10
7-11
1.
2.
3.
4.
5.
7-12
7-13
7-14
Cobb Company incurs costs of $28 per unit ($18 variable and $10
fixed) to make a product that normally sells for $42. A foreign
wholesaler offers to buy 5,000 units at $25 each. Cobb will incur
additional shipping costs of $1 per unit. Compute the increase or
decrease in net income Cobb will realize by accepting the special
order, assuming Cobb has excess operating capacity. Should
Cobb Company accept the special order?
Accept
or
Reject?
7-15
LO 3
7-17
7-18
7-19
7-20
$90,000
20,000
Variable overhead
Fixed overhead
$32,000
24,000
LO 4
7-22
LO 4
7-23
LO 4
7-24
Decision Rule:
Process further as long as the incremental revenue from
such processing exceeds the incremental processing
costs.
7-25
7-26
LO 5
LO 5
Illustration 7-10
Joint product costs are sunk costs and thus not relevant to the sellor-process further decision.
7-28
LO 5
LO 5
7-30
LO 5
Marais should
shouldor
orshould
shouldnot
notprocess
processthe
themilk
milkfurther?
further?
7-32
Retain or Replace?
7-35
7-36
7-37
7-38
LO 7
7-40
7-41
7-42
LO 7
7-43
7-44
7-45
7-46
Copyright
Copyright 2012 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
7-47