Ch12 ACCG20478 (Cost 2) PPT MM

12-1
MANAGERIAL
ACCOUNTING
Ninth Canadian Edition
GARRISON, CHESLEY, CARROLL, WEBB,
LIBBY
Relevant Costs for Decision

Making
Chapter 12
PowerPoint Author:
Robert G. Ducharme, MAcc, CA

University of Waterloo, School of Accounting and Finance
Copyright 2012 McGraw-Hill Ryerson Limited
12-2
Its All About Making a Decision

Course Learning Outcome
By the end of this course, students will have
demonstrated the ability to use managerial

accounting reports and analytical tools to
plan, control and evaluate an organization.
12-3
Its All About Making a Decision

Chapter 12 Relevant Costs for
Decision Making
Identify relevant costs and develop decision
making models that can be used to support
recommendations made to the management
team to improve overall profitability of a
company.
4-4
Agenda
Identification of Relevant Costs
Adding/Dropping a Segment
Make or Buy a Component
Evaluating a Special Order
Utilization of a Constrained Resource
Sell or Process Further
4-5
Agenda
12-6
Decision Making: Alternatives
Every decision involves choosing between at least

two alternatives.
LO 1 Distinguish between relevant and irrelevant costs
12-7
Decision Making: Costs and Benefits
Managers make decisions by identifying and

focusing on the costs and benefits that differ from
one alternative to another.
1
12-8
Decision Making: Costs and Benefits
The Key Word is:
AVOIDABLE
1
12-9
Identifying Relevant Costs/Benefits

IfIf you
you have
have to
to choose
choose between
between
alternative
alternative A
A and
and alternative
alternative B
B
the
the question
question becomes;
becomes;
What
What costs/benefits
costs/benefits are
are relevant
relevant in
in choosing
choosing
alternative
alternative A
A??
Sometimes
Sometimes the
the best
best way
way to
to answer
answer that
that
question
question is
is to
to actually
actually ask;
ask;
IfIf II didn
didntt choose
choose alternative
alternative A
A what
what
costs/benefits
costs/benefits would
would II be
be avoiding
avoiding??
12-10
Identifying Relevant Costs/Benefits

An
An avoidable
avoidable cost
cost is
is aa cost
cost that
that can
can be
be
eliminated,
eliminated, in
in whole
whole or
or in
in part,
part, by
by choosing
choosing
one
one alternative
alternative over
over another.
another.
Avoidable
Avoidable costs
costs are
are relevant
relevant costs.
costs.
Unavoidable
Unavoidable costs
costs are
are irrelevant
irrelevant costs.
costs.
Two
Two broad
broad categories
categories of
of costs
costs are
are never
never
relevant
relevant in
in any
any decision
decision are:
are:
Sunk
Sunk costs
costs (unavoidable
(unavoidable because
because they
they happened
happened in
in the
the
past)
past) and
and
Future
Future costs
costs that
that do
do not
not differ
differ between
between the
the alternatives
alternatives
(unavoidable
(unavoidable no
no matter
matter what
what choice
choice you
you make).
make).
12-11
Relevant Cost Analysis: A Two-Step

Process
Step 1 Eliminate costs and benefits that do not differ
between alternatives.
Step 2 Use the remaining costs and benefits that
differ between alternatives to help make the
decision. The costs and benefits that remain
are the differential, or avoidable, costs and
benefits.
LO 1
12-19
Connect In-Class
Exercise 12-1
12-20
Different Costs for Different Purposes
Costs that are

relevant in one
decision situation
may not be relevant
in another context.
12-21
Connect In-Class
Exercise 12-14
12-22
Jason and Duck Hunting

These three requirements in exercise 1214 illustrate the slippery nature of costs. A
cost that is relevant in one situation can be
irrelevant in the next. None of the costs
except possibly the cost of the shotgun
shellsare relevant when we compute the
cost of bagging a particular duck; some of
them are relevant when we compute the
cost of a hunting trip; and more of them
are relevant when we consider the
possibility of giving up hunting
12-23
Total versus Differential Cost

Approaches
The management of a company is considering a new labour saving
machine that rents for $3,000 per year. Data about the companys
annual sales and costs with and without the new machine are:
12-24

Approaches
As you can see, the only costs that differ between the alternatives are
the direct labour costs savings and the increase in fixed rental costs.
We can efficiently analyze the decision by

looking at the different costs and revenues
and arrive at the same solution.
12-25

Approaches
Using the differential approach is desirable for
two reasons:
1. Only rarely will enough information be
available to prepare detailed income
statements for both alternatives.
2. Mingling irrelevant costs with relevant costs
may cause confusion and distract attention
away from the information that is really
critical.
4-26
Agenda
12-27
Adding/Dropping Segments
One of the most important decisions
managers make is whether to add or drop
a business segment, such as a product or
a store.
Let
Letss see
see how
how relevant
relevant costs
costs should
should
be
be used
used in
in this
this type
type of
of decision.
decision.
LO 2 Prepare analyses for various decision situations
12-28
Due
Due to
to the
the declining
declining popularity
popularity of
of digital
digital
watches,
watches, Lovell
Lovell Company
Companyss digital
digital watch
watch
line
line has
has not
not reported
reported aa profit
profit for
for several
several
years.
years. Lovell
Lovell is
is considering
considering discontinuing
discontinuing
this
this product
product line.
line.
12-29
A Contribution Margin Approach

DECISION
DECISION RULE
RULE
Lovell
Lovell should
should drop
drop the
the digital
digital watch
watch segment
segment only
only ifif its
its
profit
profit would
would increase.
increase. This
This would
would only
only happen
happen ifif the
the
fixed
fixed cost
cost savings
savings exceed
exceed the
the lost
lost contribution
contribution
margin.
margin.
Lets
Lets look
look at
at the
the analysis.
analysis.
12-30
Should
Should Lovell
Lovell retain
retain or
or drop
drop
the
the digital
digital watch
watch segment?
segment?
12-31
Investigation
Investigation has
has revealed
revealed that
that
total
total fixed
fixed general
general factory
factory overhead
overhead and
and
total
total general
general administrative
administrative expenses
expenses
would
would not
not be
be affected
affected ifif the
the digital
digital watch
watch line
line is
is
dropped.
dropped. They
They would
would simply
simply be
be reallocated
reallocated to
to
other
other product
product lines.
lines.
The
The equipment
equipment used
used to
to manufacture
manufacture digital
digital
watches
watches has
has no
no resale
resale value
value or
or alternative
alternative use
use
(i.e.
(i.e. itit is
is irrelevant
irrelevant to
to the
the decision).
decision).
12-32
12-33
A Contribution Margin Approach
RRe
ettaai
inn
12-34
Comparative Income Approach
The Lovell solution can also be obtained by preparing

comparative income statements showing results with
and without the digital watch segment.
Let
Letss look
look at
at this
this second
second approach.
approach.
12-35
IfIf the
the digital
digital watch
watch
line
line is
is dropped,
dropped, the
the
company
company gives
gives up
up
its
its contribution
contribution
margin.
margin.
12-36
On
On the
the other
other hand,
hand, the
the total
total
general
general factory
factory overhead
overhead for
for the
the
company
company would
would be
be the
the same.
same. So
So
this
this cost
cost really
really isnt
isnt relevant.
relevant.
12-37
But
But we
we wouldnt
wouldnt need
need aa
manager
manager for
for the
the product
product line
line
anymore.
anymore.
12-38
IfIf the
the digital
digital watch
watch line
line is
is dropped,
dropped, the
the net
net book
book value
value
of
of the
the equipment
equipment would
would be
be written
written off.
off. The
The
depreciation
depreciation that
that would
would have
have been
been taken
taken over
over time
time will,
will,
instead,
instead, flow
flow through
through the
the income
income statement
statement as
as aa oneonetime
time loss.
loss. So
So we
we cant
cant really
really avoid
avoid the
the depreciation,
depreciation, itit
just
just hits
hits the
the income
income statement
statement in
in aa different
different way
way and
and
time.
time.
12-39
12-40
Beware of Allocated Fixed Costs
Why should we keep the

digital watch segment
when its showing a
$100,000 loss?
12-41
The answer lies in the

way we allocate
common fixed costs to
our products.
12-42

Our allocations can
make a segment look
less profitable than it
really is.
12-43
Connect In-Class
Exercise 12-2
Exercise 12-8
4-44
Agenda
12-45
The Make or Buy Decision

When
When aa company
company is
is involved
involved in
in more
more than
than one
one activity
activity
in
in the
the entire
entire value
value chain,
chain, itit is
is vertically
vertically integrated.
integrated. A
A
decision
decision to
to carry
carry out
out one
one of
of the
the activities
activities in
in the
the value
value
chain
chain internally,
internally, rather
rather than
than to
to buy
buy externally
externally from
from aa
supplier
supplier is
is called
called aa make
make or
or buy
buy decision.
decision.
12-46
Vertical Integration Advantages
Smoother flow of
parts and materials
Better quality
control
Realize profits
12-47
Vertical Integration Disadvantage
Companies may fail

to take advantage of
suppliers who can
create economies of
scale advantage by
pooling demand from
numerous
companies.
12-48
The Make or Buy Decision: An Example
Essex Company manufactures part 4A that is used in

one of its products.
The unit product cost of this part is:
12-49

The special equipment used to manufacture part
4A has no resale value.
The total amount of general factory overhead,

which is allocated on the basis of direct labour
hours, would be unaffected by this decision.
The $30 unit product cost is based on 20,000

parts produced each year.
An outside supplier has offered to provide the

20,000 parts at a cost of $25 per part.
Should
Should we
we accept
accept the
the supplier
supplierss offer?
offer?
12-50
20,000 $9 per unit = $180,000

12-51
The
The special
special equipment
equipment has
has no
no resale
resale
value
value and
and is
is aa sunk
sunk cost.
cost.
12-52
Not
Not avoidable;
avoidable; irrelevant.
irrelevant. IfIf the
the product
product is
is
dropped,
dropped, itit will
will be
be reallocated
reallocated to
to other
other products.
products.
12-53
Should we make or buy part 4A?

12-54
Opportunity Cost
An
An opportunity
opportunity cost
cost is
is the
the benefit
benefit that
that is
is foregone
foregone
as
as aa result
result of
of pursuing
pursuing some
some course
course of
of action.
action.
Opportunity
Opportunity costs
costs are
are not
not actual
actual dollar
dollar outlays
outlays
and
and are
are not
not recorded
recorded in
in the
the formal
formal accounts
accounts of
of
an
an organization.
organization.
How
How would
would this
this concept
concept potentially
potentially relate
relate to
to the
the
Essex
Essex Company?
Company?
12-55
Connect In-Class
Exercise 12-3
Exercise 12-9
4-56
Agenda
12-57
Key Terms and Concepts
A special order is a one-time

order that is not considered
part of the companys normal
ongoing business.
When analyzing a special

order, only the incremental
costs and benefits are
relevant.
12-58
Special Orders
Jet,
Jet, Inc.
Inc. makes
makes aa single
single product
product whose
whose normal
normal selling
selling
price
price is
is $20
$20 per
per unit.
unit.
A
A foreign
foreign distributor
distributor offers
offers to
to purchase
purchase 3,000
3,000 units
units for
for
$10
$10 per
per unit.
unit.
This
This is
is aa one-time
one-time order
order that
that would
would not
not affect
affect the
the
company
companyss regular
regular business.
business.
Annual
Annual capacity
capacity is
is 10,000
10,000 units,
units, but
but Jet,
Jet, Inc.
Inc. is
is
currently
currently producing
producing and
and selling
selling only
only 5,000
5,000 units.
units.
Should Jet accept the offer?
12-59
Special Orders
$8 variable cost
12-60
Special Orders
If Jet accepts the special order, the incremental revenue will
exceed the incremental costs. In other words, net operating
income will increase by $6,000. This suggests that Jet
should accept the order.
Note: This answer assumes that the fixed costs are

unavoidable and that variable marketing costs must be
incurred on the special order.
12-64
Connect In-Class
Exercise 12-4
Exercise 12-10
4-65
Agenda
Definitions
12-66
Key Terms and Concepts

When a limited resource
of some type restricts
the companys ability to
satisfy demand, the
company is said to have
a constraint.
The machine or process

that is limiting overall
output is called the
bottleneck it is the
constraint.
LO 3
12-67
When
When aa constraint
constraint exists,
exists, aa company
company should
should
select
select aa product
product mix
mix that
that maximizes
maximizes the
the total
total
contribution
contribution margin
margin earned
earned since
since fixed
fixed costs
costs
usually
usually remain
remain unchanged.
unchanged.
AA company
company should
should not
not necessarily
necessarily promote
promote
those
those products
products that
that have
have the
the highest
highest unit
unit
contribution
contribution margin.
margin.
Rather,
Rather, itit should
should promote
promote those
those products
products that
that
earn
earn the
the highest
highest contribution
contribution margin
margin in
in relation
relation
to
to the
the constraining
constraining resource.
resource.
LO 3
12-68
Utilization of a Constrained Resource:

An Example
Ensign Company produces two products and
selected data are shown below:
LO 3
12-69

Machine
Machine A1
A1 is
is the
the constrained
constrained resource
resource and
and is
is
being
being used
used at
at 100%
100% of
of its
its capacity.
capacity.
There
There is
is excess
excess capacity
capacity on
on all
all other
other
machines.
machines.
Machine
Machine A1
A1 has
has aa capacity
capacity of
of 2,400
2,400 minutes
minutes
per
per week.
week.
Should
Should Ensign
Ensign focus
focus its
its efforts
efforts on
on
Product
Product 11 or
or Product
Product 2?
2?
LO 3
12-70
Quick Check
How many units of each product can be
processed through Machine A1 in one minute?
Product 1
a.
1 unit
b.
1 unit
c.
2 units
d.
2 units
Product 2
0.5 unit
2.0 units
1.0 unit
0.5 unit
LO 3
12-71
Quick Check
How many units of each product can be
processed through Machine A1 in one minute?
a.
b.
c.
d.
Product 1
1 unit
1 unit
2 units
2 units
Product 2
0.5 unit
2.0 units
1.0 unit
0.5 unit
I was just checking to make sure

you are with us.
LO 3
12-72
Quick Check
What generates more profit for the company,
using one minute of machine A1 to process
Product 1 or using one minute of machine A1 to
process Product 2?
a. Product 1
b. Product 2
c. They both would generate the same profit.
d. Cannot be determined.
LO 3
12-73
Quick Check
With one minute of machine A1, we could
What
more profit
the
makegenerates
1 unit of Product
1, for
with
a company,
contribution
using
oneof
minute
of 2machine
to process
margin
$24, or
units ofA1
Product
2, each
Product
1 or
using one minute
of machine
with
a contribution
margin
of $15. A1 to
process Product 2?
2 $15 = $30 > $24
a. Product 1
b. Product 2
c. They both would generate the same profit.
d. Cannot be determined.
LO 3
12-74

The key is the contribution margin per unit of the
constrained resource.
Product 2 should be emphasized. Provides more

valuable use of the constrained resource machine A1,
yielding a contribution margin of $30 per minute as
opposed to $24 for Product 1.
LO 3
12-75

The key is the contribution margin per unit of the
constrained resource.
IfIf there
there are
are no
no other
other considerations,
considerations, the
the best
best
plan
plan would
would be
be to
to produce
produce to
to meet
meet current
current
demand
demand for
for Product
Product 22 and
and then
then use
use remaining
remaining
capacity
capacity to
to make
make Product
Product 1.
1.
LO 3
12-76

Lets see how this plan would work.
Alloting
Alloting Our
Our Constrained
Constrained Resource
Resource (Machine
(Machine A1)
A1)
Weekly
Weeklydemand
demand for
for Product
Product22
Time
Time required
required per
perunit
unit
Total
Total time
time required
required to
to make
make
Product
Product22
2,200
2,200
0.50
0.50
units
units
min.
min.
1,100
1,100 min.
min.
LO 3
12-77

Alloting
Alloting Our
Our Constrained
Resource (Machine
(Machine A1)
A1)
Weekly
Weeklydemand
demand for
for Product
Product22
Time
Time required
required per
perunit
unit
Total
Total time
time required
required to
to make
make
Product
Product22
Total
Total time
time available
available
Time
Time used
used to
to make
make Product
Product22
Time
Time available
available for
for Product
Product11
2,200
2,200
0.50
0.50
units
units
min.
min.
1,100
1,100 min.
min.
2,400
2,400
1,100
1,100
1,300
1,300
min.
min.
min.
min.
min.
min.
LO 3
12-78

Alloting
Alloting Our
Our Constrained
Resource (Machine
(Machine A1)
A1)
Weekly
Weeklydemand
demand for
for Product
Product22
Time
Time required
required per
perunit
unit
Total
Total time
time required
required to
to make
make
Product
Product22
Total
Total time
time available
available
Time
Time used
used to
to make
make Product
Product22
Time
Time available
available for
for Product
Product11
Time
Time required
required per
perunit
unit
Production
Production of
ofProduct
Product11
2,200
2,200
0.50
0.50
units
units
min.
min.
1,100
1,100 min.
min.
2,400
2,400
1,100
1,100
1,300
1,300
1.00
1.00
1,300
1,300
min.
min.
min.
min.
min.
min.
min.
min.
units
units
LO 3
12-79

According to the plan, we will produce 2,200 units
of Product 2 and 1,300 of Product 1. Our
contribution margin looks like this.
Production and sales (units)

Contribution margin per unit
Total contribution margin
Product 1
1,300
$
24
$ 31,200
Product 2
2,200
$
15
$ 33,000
The total contribution margin for Ensign is $64,200.

LO 3
12-80
Quick Check
Colonial Heritage makes reproduction colonial
furniture from select hardwoods.
Chairs
Selling price per unit
$80
Variable cost per unit
$30
Board feet per unit
2
Monthly demand
600
Tables
$400
$200
10
100
The companys supplier of hardwood will only be

able to supply 2,000 board feet this month. Is this
enough hardwood to satisfy demand?
a. Yes
b. No
LO 3
12-81
Quick Check
Colonial Heritage makes reproduction colonial
furniture from select hardwoods.
Chairs
$80
$30
Board feet per unit
2
Monthly demand
600
Tables
$400
$200
10
100

able to supply 2,000 board feet this month. Is this
enough hardwood to satisfy demand?
a. Yes
b. No (2 600) + (10 100 ) = 2,200 > 2,000
LO 3
12-82
Quick Check
Chairs
$80
$30
Board feet per unit
2
Monthly demand
600
Tables
$400
$200
10
100

able to supply 2,000 board feet this month. What
plan would maximize profits?
a. 500 chairs and 100 tables
b. 600 chairs and 80 tables
c. 500 chairs and 80 tables
d. 600 chairs and 100 tables
LO 3
12-83
Quick Check
Chairs Tables
Selling price
$ 80 $ 400
Chairs Tables
Variable
200
Selling price per
unit cost$80
$400 30
Variable cost Contribution
per unit
$30
margin $200
$ 50 $ 200
Board feet perBoard
unit feet
2
10 2
10
Monthly demand
600
100
CM per board foot
$ 25 $ 20

Production of chairs
600
able to supply 2,000
board feet this month.
What
Board feet required
1,200
plan would maximize
profits?
Board feet remaining
800
a. 500 chairs and Board
100 tables
feet per table
10
b. 600 chairs and Production
80 tables of tables
80
c. 500 chairs and 80 tables
d. 600 chairs and 100 tables
LO 3
12-84
Quick Check
As before, Colonial Heritages supplier of
hardwood will only be able to supply 2,000 board
feet this month. Assume the company follows the
plan we have proposed. Up to how much should
Colonial Heritage be willing to pay above the
usual price to obtain more hardwood?
a. $40 per board foot
b. $25 per board foot
c. $20 per board foot
d. Zero
LO 3
12-85
Quick Check
As before, Colonial Heritages supplier of
hardwood
will only
be able
to supply
2,000
The
additional
wood
would
be used
to board
make
feet
this month.
Assume
the company
follows
tables.
In this
use, each
board foot
of the
plan we have
proposed.
Upthe
to how
much should
additional
wood
will allow
company
to earn
Heritage
to pay above
the and
anColonial
additional
$20be
of willing
contribution
margin
usual price to obtain profit.
more hardwood?
a. $40 per board foot
b. $25 per board foot
c. $20 per board foot
d. Zero
LO 3
12-86
Managing Constraints
The theory of constraints (TOC) maintains that effectively
managing a constraint is important to the financial success
of an organization.
Finding ways to
process more units
through a resource
bottleneck
At the bottleneck itself:

Improve the process
Add overtime or another shift
Hire new workers or acquire
more machines
Subcontract production
Reduce amount of defective
units produced
Add workers transferred from
non-bottleneck departments
LO 3
12-87
Connect In-Class
Exercise 12-5
Exercise 12-11
4-88
Agenda
Definitions
12-89
Joint Costs
In some industries, a number of end
products are produced from a single raw

material input.
Two or more products produced from a
common input are called joint
products
joint products.
The point in the manufacturing process
where each joint product can be
recognized as a separate product is
called the split-off
point
split-off point.
LO 2
12-90
Joint Products
Oil
Joint
Input
Common
Production
Process
Gasoline
Chemicals
Split-Off
Point
LO 2
12-91
Joint Products
Joint
Costs
Joint
Input
Common
Production
Process
Oil
Gasoline
Chemicals
Split-Off
Point
Separate
Processing
Final
Sale
Final
Sale
Separate
Processing
Final
Sale
Separate
Product
Costs
LO 2
12-92
The Pitfalls of Allocation

Joint costs are often
allocated to end products on
the basis of the relative
sales value of each product
or on some other basis.
Although allocation is needed for
some purposes such as balance
sheet inventory valuation,
allocations of this kind are very
dangerous for decision making.
LO 2
12-93

Joint costs are irrelevant in decisions regarding
what to do with a product from the split-off point
forward.
It will always be profitable to continue processing a
joint product after the split-off point so long as
the incremental revenue exceeds the
incremental processing costs incurred after the
split-off point.
LO 2
12-94
Sell or Process Further: An Example

Sawmill,
Sawmill, Inc.
Inc. cuts
cuts logs
logs from
from which
which unfinished
unfinished
lumber
lumber and
and sawdust
sawdust are
are the
the immediate
immediate joint
joint
products.
products.
Unfinished
Unfinished lumber
lumber is
is sold
sold as
as is
is or
or processed
processed
further
further into
into finished
finished lumber.
lumber.
Sawdust
Sawdust can
can also
also be
be sold
sold as
as is
is to
to gardening
gardening
wholesalers
wholesalers or
or processed
processed further
further into
into prestoprestologs.
logs.
LO 2
12-95

Data about Sawmills joint products includes:
Increase in revenue?
increase in costs?
Sales value at the split-off point
Sales value after further processing
Allocated joint product costs
Cost of further processing
Lumber
$ 140
270
176
50
Per Log
Sawdust
$
40
50
24
20
LO 2
12-96

Analysis of Sell or Process Further
Per Log

Incremental revenue
Lumber
Sawdust
270
140
130
50
40
10
LO 2
12-97

Per Log

Incremental revenue
Profit (loss) from further processing
Lumber
Sawdust
270
140
130
50
80
50
40
10
20
(10)
LO 2
12-98

Per Log

Incremental revenue
Profit (loss) from further processing
Lumber
Sawdust
270
140
130
50
80
50
40
10
20
(10)
Should we process the lumber further

and sell the sawdust as is?
LO 2
12-99
Connect In-Class
Exercise 12-6
Exercise 12-12
12-100
End of Chapter 12

Ch12 ACCG20478 (Cost 2) PPT MM

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12-1

Relevant Costs for Decision

Robert G. Ducharme, MAcc, CA

Its All About Making a Decision

demonstrated the ability to use managerial

Copyright 2012 McGraw-Hill Ryerson Limited

Its All About Making a Decision

Copyright 2012 McGraw-Hill Ryerson Limited

Copyright 2012 McGraw-Hill Ryerson Limited

Copyright 2012 McGraw-Hill Ryerson Limited

Decision Making: Alternatives

Every decision involves choosing between at least

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Decision Making: Costs and Benefits

Managers make decisions by identifying and

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Decision Making: Costs and Benefits

The Key Word is:

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Identifying Relevant Costs/Benefits

LO 1 Distinguish between relevant and irrelevant costs

Identifying Relevant Costs/Benefits

LO 1 Distinguish between relevant and irrelevant costs

Relevant Cost Analysis: A Two-Step

Copyright 2012 McGraw-Hill Ryerson Limited

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Different Costs for Different Purposes

Costs that are

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Jason and Duck Hunting

LO 1 Distinguish between relevant and irrelevant costs

Total versus Differential Cost

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Total versus Differential Cost

We can efficiently analyze the decision by

Copyright 2012 McGraw-Hill Ryerson Limited

LO 1 Distinguish between relevant and irrelevant costs

Total versus Differential Cost

LO 1 Distinguish between relevant and irrelevant costs

Copyright 2012 McGraw-Hill Ryerson Limited

Copyright 2012 McGraw-Hill Ryerson Limited

LO 2 Prepare analyses for various decision situations

Copyright 2012 McGraw-Hill Ryerson Limited

LO 2 Prepare analyses for various decision situations

A Contribution Margin Approach

Copyright 2012 McGraw-Hill Ryerson Limited

LO 2 Prepare analyses for various decision situations

Copyright 2012 McGraw-Hill Ryerson Limited

LO 2 Prepare analyses for various decision situations

LO 2 Prepare analyses for various decision situations

Copyright 2012 McGraw-Hill Ryerson Limited

LO 2 Prepare analyses for various decision situations

A Contribution Margin Approach

Copyright 2012 McGraw-Hill Ryerson Limited

LO 2 Prepare analyses for various decision situations