Concept introduction:
Managerial Decision:
Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager’s decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.
Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.
Two basic types of the relevant costs are as follows:
- Out-of-pocket costs
- Opportunity costs
To choose:
The correct term for the cost defined.
Want to see the full answer?
Check out a sample textbook solutionChapter 1 Solutions
Managerial Accounting
- Use the following information to answer the questions that follow. A. Calculate the operating income percentage for each of the courses. Comment on how your analysis has changed for each course. B. Perform a vertical analysis for each course. Based on your analysis, what accounts would you want to investigate further? How might management utilize this information? C. Which method of analysis (using a dollar value or percentage) is most relevant and/or useful? Explainarrow_forwardYou are trying to decide whether to take a job after you graduate or go onto graduate school. Consider the following questions as you make your decision. A. Which of these costs, for the most part, would be relevant (R), and which would be irrelevant (IR)? Cost of your Undergraduate education Salary with an undergraduate degree Salary with both an undergraduate degree and a graduate degree Rent Car Insurance Graduate school tuition and fees Food costs Moving expenses B. Which of these costs could have a differential amount that is relevant/irrelevant, depending upon the location and or policies of your new job?arrow_forwardAccording to the unit, which of the following cannot be used to estimate the value added? Group of answer choices Computing actual dollars saved Asking customers what they are willing to pay Calculating the time saved multiplied by the value of that time Noting the value of activities made possible as a result of the product or servicearrow_forward
- The salary foregone by a person who quits a job to start a business is an example of a(n) ________. a-opportunity cost b-depreciable cost c-outlay cost d-sunk cost e-irrelevant costarrow_forwardMatch each of the terms below with its definition. 1. Sunk cost a. Additional costs incurred from a course of action 2. Out-of-pocket cost b. Additional revenue from a course of action 3. Opportunity cost c. A future outlay of cash 4. Incremental cost d. Potential benefit lost from taking a course of action 5. Incremental revenue e. A cost that arises from a past decision and cannot be changedarrow_forwardIn my accounting class I am learning how to prepare contribution margin income statements. I am having trouble learning how to calculate variable costs, fixed cost per unit, variable cost per unit, and fixed costs per year. Is there a special equation I should usearrow_forward
- The term "opportunity cost" is best defined as: a. the amount of money paid for an item. b. the amount of money paid for an item, taking inflation into account. c. the amount of money paid for an item, taking possible discounts into account. d. the benefit associated with a rejected alternative when making a choice.arrow_forwardif costs are two high: Select one: a. Company loses work b. Company loses money C. It means error in estimation d. All the abovearrow_forwardIn making short-term business decisions, what should you do? a. Use a traditional costing approach. b. Focus on total costs. c. Separate variable from fixed costs. d. Focus only on quantitative factors.arrow_forward
- (a) Briefly explain the MAIN difference between variable costing and absorption costing in terms of the treatment of costs in the financial statements. (b) Explain why the variable costing income measurement approach would be attractive to a manager who is interested in projecting her firm’s future profit performance. (c) List 3 bank fees or service charge and furnish at least 4 reasons as to whether these fees are fair, unfair, reasonable or unreasonable to clients of the bank.arrow_forwardThe line that begins at the origin on a CVP graph represents total expenses. total fixed expenses. total sales revenues. both the total expenses and the total sales revenues. Which of the following best describes the concept of a "constraint?" Expected future costs that differ among alternatives. None of the items in this list of answers. A benefit foregone by choosing one alternative course over another. The distribution of all products to be sold.arrow_forwardWhen a buyer makes a marginal decision on how to spend an additional dollar, it allows them to: Select one: O a. maximize utility. O b. maximize wealth. O c. minimize their budget constraint. O d. spend their entire budget.arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College