COST AND MANAGEMENT ACCOUNTING TECHNIQUES: MUST FOR EFFECTIVE DECISION MAKING

1. Cost & Management Accounting Techniques Must for Effective Decision Making BY: A AMIR INSTITUTE OF COST & MANAGEMENT ACCOUNTANTS OF PAKISTAN

8. The Make or Buy Decision 20,000 × $9 per unit = $180,000

9. The Make or Buy Decision The special equipment has no resale value and is a sunk cost.

10. The Make or Buy Decision Not avoidable; irrelevant. If the product is dropped, it will be reallocated to other products.

11. The Make or Buy Decision Should we make or buy part 4A?

14. Impact of JIT Inventory Methods In a JIT inventory system . . . Production tends to equal sales . . . So, the difference between variable and absorption income tends to disappear.

16. Inventory Management

17. Qunatity Discounts Avoid Disturbance Reduce number of ordering / setup Hedge against inflation Meet Unexpected Demands Quantity Discounts When to order How much to order Buffer Stock Maximum Inventory How often to review stock E O Q R O P

19. Budgeting Define goal and objectives Uncover potential bottlenecks Coordinate activities Communicating plans Think about and plan for the future Means of allocating resources

23. CVP Graph Units Dollars Fixed expenses Total Expenses Total Sales

24. CVP Graph Units Dollars Profit Area Loss Area Break-even point

25. Equation Method Profits = Sales – (Variable expenses + Fixed expenses) Sales = Variable expenses + Fixed expenses + Profits OR At the break-even point profits equal zero.

33. ECM