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Management Accounting
Managerial Accounting

Chapter 5

Common cost concepts and basic methods for business decision-making

N section 1

Cost concept to be considered in business decision-making

N section 2 basic methods of business decision-making

2

Section 1

Cost concept to be considered in business decision-making

I. Overview of Decision-Making costs

Decision cost

-

Has a specific economic meaning, used

Evaluate the economics of a feasible solution (or project)

Various forms of cost.

3

Decision-making costs and the cost concepts used in traditional financial accounting include:

As follows:

Differences

:

1. The cost used in traditional financial accounting is the historical cost.

Policy costs are mostly future costs, which describe future possibilities

Expenses incurred.

2. The decision-making cost is the need for decision analysis. for specific purposes,

The cost concept proposed in the condition and environment, which is applicable only to specific

The scope is not as common as the cost data of financial accounting

Applicability.

3. The decision-making cost is only used for Decision Analysis and does not need to be included in accounting

Accounts do not need to comply with the accepted accounting standards and have a large

Flexibility.

4

Ii. Common Decision-Making costs

(1) Opportunity Cost

Opportunity Cost

-In the decision analysis process

In this case, the optimal solution is selected and the sub-optimal solution is abandoned.

The benefits of the solution may be abandoned and become a loss.

Loss is the opportunity cost for selecting the optimal solution.

Opportunity Cost

It is not a realistic cost.

Accounting records, but must be carefully tested in Decision Analysis

Otherwise, an incorrect choice may be made.

5

For example, an enterprise has a device that can be used by itself or

For rent. If you choose to use it for your own use, you will lose the server that obtains the rent.

Yes, the rent is the opportunity cost for the device to use.

Example

5-1) See

P165 (example:

5-1 〕

As shown in the preceding example, the significance of opportunity cost in decision-making lies in its

This helps you fully consider the various possible solutions

Find the most favorable way to use specific resources.

Note:

: If one asset can only be used to complete one job

Yes, that is, it cannot be used in other aspects or be voided.

If the product is sold, there is no opportunity cost for the asset.

6

Opportunity costs also have a special form

--

Estimate costs.

Generally, the opportunity cost is easy to measure, but some

Estimation is called estimation.

Calculate the cost. Interest is an estimate of costs.

7

(2) Cost Difference

The difference cost can be broadly or narrowly defined.

Generalized cost difference

-Expected costs of the two alternatives

The difference between them, also known

"Differentiated costs

".

Narrow difference cost

-

The degree of utilization of production capacity

Cost difference due to differences (increase or decrease)

No. This cost is also known

"Incremental cost

".

8

[Example 5-2] See p165 (example 5-2) and p166 (example 5-3 〕

As shown in [Example 5-3 ],

Less than 10,000 pieces), the difference cost is consistent with the change cost

But it cannot be considered that the difference between the cost and the variable cost

. The variable cost is

Output

The difference is

This is an alternative

Transformation Scheme

Contact occurred. If

The solution is to change the production factor, and within the relevant scope, the cost of difference

It may be the same as the variable cost, but it is out of this range due to the difference

Volume costs may also include fixed costs and increase of semi-variable costs

And the two are not necessarily equal.

9

(3) Marginal Cost

Economics

The marginal cost in refers to the continuous cost.

The first derivative of the business volume in the function. Assume the cost

The function is f (x), X is the business volume, and MC is the marginal cost.

With MC = f' (x), that is, with MC =

That is to say, the marginal cost is

"The cost is infinitely small to the business volume

Dynamic and changing parts

".

△X

F (x)

△X)

F (x

Lim

0

△X

−

+

→

10

In Management Accounting

Medium, marginal cost refers to when the business volume is

The amount of cost changes caused by a minimum economic unit change.

Obviously, the marginal cost in management accounting is not only discrete,

It is also a special form of incremental costs.

In decision analysis, the marginal cost can be used to determine the increase or decrease in output.

Cost effectiveness. When the production capacity of an enterprise is rich

The unit price of any sales increase is slightly higher than the unit price.

Cost (or unit change cost), even if it is lower than the average

The unit cost also increases profits or reduces losses.

11

(4) sunk costs

Sunk Costs

-Caused by past decisions and implemented

The cost of payment. It is comparing different solutions

No matter which solution is adopted, the same cost will occur.

For example, the equipment, plant, and other fixed assets invested in the past belong

At sunk costs.

In decision analysis, we do not consider sunk costs.

Note:

: Sunk costs and fixed costs are not a concept.

It is usually a fixed cost, but sometimes it may include changes

Cost. In addition, not all fixed costs are sunk.

Cost, such as a discount on new fixed assets related to the decision-making scheme

Old fees are the costs that must be taken into account in decision-making.

12

(5) pay-as-you-go costs

Pay-as-you-go costs

-Introduced by current or future decisions

The amount to be paid by using cash or bank deposits in the future.

. The current costs of different solutions are often different.

Example

5-3) See

P168 (example

5-7 〕

(Example 5-4) An enterprise's key processing equipment is damaged for some reason.

Reset, two manufacturers are willing to provide such processing equipment.

In the solution, the device price of plant a is 50,000 yuan, which requires one-time payment.

Clear; the price of plant B's equipment is 65,000 yuan, and the payment can be paid in installments

To pay, you need to pay 5,000 yuan first, and the remaining payment is half a year

Pay off within the period, and pay an average of 10,000 RMB per month. This enterprise

The funds are relatively insufficient, and the bank deposit balance is only 6,000 yuan,

Obviously, the Enterprise is faced with two advantages.

13

(6) Exclusive costs and joint costs

See p169

(7) selectable and binding costs

See p169

(8) related and irrelevant costs

See p169

14

Section 2

Basic Methods for business decision-making

I. Contribution Mao Yi Analysis Method

Contribution Mao Yi Analysis Method

--

Through comparison several feasible

The contribution of the scheme to evaluate the advantages and disadvantages of the Scheme

Degree decision method.

Note:

: The contribution or ticket that each product can create

The contribution of artificial hours (or machine hours)

As the main basis for the selection, but cannot take the product

The contribution of the organization to the gross profit is used as the criterion for selection.

15

Ii. Difference Analysis

Difference Analysis

--

Through pre-approval of several feasible solutions

The measurement and comparison of period income and expected cost are as follows,

Analyze the difference income, difference cost, and difference of each solution

Based on the amount of profit and its nature

A method for analyzing the merits and demerits of a case.

16

The basic program of difference analysis is as follows:

Solution 1 solution 2

Difference

Quantity

S expected revenue

S1

S2

S1-S2

C. Expected cost

C1

C2

C1-C2

P expected profit

P1

P2

P1-P2 = (S1-S2)-(C

1-c2)

The decision-making rules (merit-based principle) are as follows:

When (S

1-s2)> (C

1-C2), that is, P

1> in P2, solution 1 is the most

When (s)

1-s2) <(C

1-C2), that is, P

1 <P2, solution 2 is

Optimal.

Note:

: The order of the schemes for calculating the difference income and the difference cost is required.

Always consistent.

17

Iii. Cost-free Difference Analysis

Cost-free Difference Analysis

--

Based on various alternatives

Dependencies between costs, business volume, and profit

Is used to calculate the zero difference between costs (also known as the cost division ).

Point) to determine the optimal solution under which circumstances

A decision-making method, also known as the cost-benefit analysis method.

Cost demarcation point

: Two Slave nodes are used in decision analysis.

The business volume when the expected cost of the selected scheme is equal. According

The relationship between the business volume and the cost at the cost demarcation point can be

Determine which scheme is better in what business volume range.

18

Cost demarcation point

X0 =

1

2

2

1

B

B

A

A

−

−

Formula:

1, A2 --

They are the fixed costs of the two alternatives;

B1, b2 --

Unit changes for the two alternatives respectively

Cost.

When the business volume <X

0, that is, 0 ~ X

Within the range of 0, fixed

The cost is low. When the business volume is greater than X

0, that is, in X

0 ~ ∞

Within the scope, the solution with high fixed costs is preferred.

19

Iv. Probability Analysis

For more information, see p177.

(Example 5-5) Yongfeng company is preparing to develop new products. There are two types of products: A and B.

The prices and costs of the products are as follows:

Item

Product

Product B

Sales Unit Price (P)

$310

$283

Unit change cost (B)

$280

$250

Total fixed costs ()

$25,000

$25,000

However, sales volume A and B are random variables after market research,

The following table lists the different sales volumes and their subjective probabilities:

20

Sales volume (pieces)

Probability

Product

Product B

700

0.1

900

0.1

0.2

1,000

0.1

0.2

1,100

0.3

0.4

1,300

0.3

0.1

1,500

0.2

Integration

1.0

1.0

Requirement: Which kind of new product is more advantageous for Yongfeng company?

Decision Analysis.

21

Solution: for such problems, you can compare them.

Contribution of products A and B Mao yilai

Make decisions.

CMA = 310-280 = 30 RMB,

CMB = 283-250 = 33 RMB, because

The sales volume of A and B is not a definite value, so we can only use the probability score.

Analysis Method to make decisions.

We can calculate

The expected sales volume of product A and product B.

You can make a decision based on the expected contribution. We

Use

EA and EB

The expected sales volume of products A and B is

Ea = 900 × 0.1 + 1,000 × 0.1 + 1,100 × 0.3 + 1,300 × 0.3 +

1,500x0.2 = 1210 pieces

EB = 700 × 0.1 + 900 × 0.2 + 1000 × 0.2 + 1100 × 0.4 +

1300x0.1 = 1020 pieces

Then Mao Yi is expected to contribute.

TCMA = 1210 × 30 = 36,300 RMB;

Tcmb = 1020 × 33 = 33,600 RMB

∴ Should produce new products

A is more advantageous.

22

(Example 5-6) Changhong Electric Appliance Factory sold 1000 Changhong window air conditioners this year

For the People's mall in Chengdu, after the air-conditioner was sold to the user

It can be repaired for one year. The factory provides the following three Parties for the warranty of air conditioners:

Case options:

Solution 1: entrust a repair shop to contract all services for repair and replacement of parts (Maintenance

Number of repairs is not limited), for the period of one year, a total of one repair fee is required

14,000 yuan.

Solution 2: entrust Repair Shop B to undertake the repair business, but the repair shop B declares

Only 1000 repair repairs can be received within the year, and a total repair fee of 10,000 is required

RMB. If it exceeds 1000 times, an additional 5 RMB repair fee is required each time.

Solution 3: entrust the repair shop C to undertake the repair business, but the repair shop C declares

Within the year, only 1500 repairs can be received. A total of one repair fee is required.

12,000 RMB, if more than 1500 times, an additional maintenance fee of 6 RMB is required each time.

23

According to the statistics of Changhong Electric Appliance Factory over the past five years

The following lists the number of active repairs and their probabilities:

Number of repairs

Less than 1000 times

1300 times

1500 times

2000 times

Probability of occurrence

0.4

0.3

0.2

0.1

1.0

Requirements: make the best warranty plan decision for Changhong Electric Appliance Factory.

Solution: solution 1: The number of repairs is not limited, and the repair cost is 14,000.

RMB;

Solution 2: Estimated repair cost =

10,000 × 0.4 + (10,000 + 300 × 5) × 0. 3 + (10,000 + 500 × 5)

× 0. 2 + (10,000 + 1000 × 5) × 0. 1 = 11450 RMB

Solution 3: Estimated repair cost =

12,000 × 0.9 + (12,000 + 500 × 6) × 0. 1 = 12,300 RMB

Solution 2 should be selected.