1. decision making

2. decision making- process
defining the problem
identifying alternatives
determine relevant cost
& revenue data
evaluating the data
considering non cost factors
making decision

3. Special costs for decision making
relevant costs & irrelevant costs
sunk costs
differential costs
marginal costs
imputed costs
opportunity costs
replacement costs
out of pocket costs
future costs
conversion cost

4. special decision making areas
selling price decisions
make or buy decisions
sales mix decision
selecting suitable method
of production
plant shut down decisions

5. special decision making areas
selling price decisions
•Competition & depression
•Additional orders
•Utilizing spare capacity
•Export market

6. Selling at or below marginal cost
•to popularize new product
•eliminate competitors
•dispose perishables
•earning foreign Exchange
•to keep pm in operation
•prevent future loss of Orders
•helping other products making
profits
•Keeping employees Occupied

7. pricing in competition & depression
•may be priced below total cost
•under marginal costing it may be above mc
•production may continue
•for a short term only

8. additional orders exploring foreign markets
•under utilized capacity
•order below total cost but above mc
•export sales may result in additional costs
•additional cost be deducted from profits
•subsidy exemptions be deducted from cost

9. make or buy decisions
Other factors
Plant capacity
Mc + loss of contribution
•Outside price compared of displaced works
with marginal cost
•Outside if mc>op
Non cost factors
•Inside if mc<op Assurance of quality
Assurance of continuity
Assurance of maintaining price

10. sales mix decisions
proportion in which various products
are produced or sold
Selecting most profitable mix

11. Selection of a suitable method of production
new product
whether to go for machine or hand labour
ordinary or automatic machine
select -which gives largest contribution

12. plant shut down- not sufficient business
temporary suspension
permanent suspension

14. differential cost is the difference in cost
between two alternatives

15. Incremental revenue is the difference in revenue
between two alternatives

16. -application
•determining optimum level of production
•accepting a special order
•adding or dropping a product
•evaluating make or buy alternatives
•Introducing an additional shift

17. -application
•determining optimum level of production

18. -application
•accepting a special order

19. -application
•adding or dropping a product

20. -application
•evaluating make or buy alternatives

21. -application
•Introducing an additional shift
Capacity units of VC FC TC DIFF SALES
Incremental
outputs Rs Rs Rs Rs Rs
Revenue
60% 60000 9000 40000 49000 540000 ---
70% 70000 10500 40000 50500 1500 56000 2000
80% 80000 12000 40000 52000 1500 60000 4000
90% 90000 13500 40000 53500 1500 60300 300
100% 100000 15000 40000 55000 1500 61000 700

22. ATTENTION COMMERCE
STUDENTS
ACCOUNTING(FINANACIAL & COST) OF
ICMAP STAGE 1,2,3,4 (NEW CLASSES)
CA..MODULE B,C,D
PIPFA (FOUNDATION,INTERMEDIATE,FINAL)
ACCA-F1,F2,F3
BBA,MBA
B.COM(FRESH),M.COM
MA-ECONOMICS..O/A LEVELS
KHALID AZIZ…..0322-3385752
cost-accountants@yahoogroups.com