Decision Making-B (Incremental/Differential cost technique) Flashcards Preview

MAC > Decision Making-B (Incremental/Differential cost technique) > Flashcards

Flashcards in Decision Making-B (Incremental/Differential cost technique) Deck (11)
Loading flashcards...
1
Q

Areas

A
  1. Further process or not
  2. Droppig or adding product line
  3. MAking best use of investment made
  4. Acceptance of additional offer from SPECIAL customer@LOWER than existing price
  5. Opening of new sales trritory or branch
  6. MAke or Buy
  7. Submitting tenders
  8. Lease or Buy
  9. Equipment replacement
2
Q

Incremental Differential Analysis

A

Existing (Equivalent to new) situtaion

+ -

New Situation (Equivalent to existing)

3
Q

Further processing or not??

Incremental revenue from processing further

vs

Incremental cost

A
4
Q

Further Processing or Not-Example 2

A
5
Q

What is relevant when

  1. Unprofitable product is dropped and related capacity left unutilzed??
  2. Unprofitable product is dropped and related capacity is unutilzed for another remunerative product
A
  1. Avoidable Fixed Cost (saving) vs Contribution lost from dropping [Aportioned FC becomes relevant]
  2. Cont. from discontinued vs Cont from new product [as apportioned FC will remain same]
6
Q

Dropping or Adding Product Line - Example

A
7
Q

Optimization of Profit - Under Limiting factor analysis

A
8
Q

OPtimizing Investment Plan

through incremental analysis

A

Increase the total investment by increments till

Change rate=Change (incremental) return/Incremental investment

If change rate>required rate

Acceptable

9
Q

OPtimizing Investment Plan-Example

A
10
Q

Decision making using cash flow technique

A
11
Q
A