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Cover
Accounting: What the Numbers Mean, 5/e
David H. Marshall, Millikin University
Wayne W. McManus, International College of the Cayman Islands
Daniel F. Viele, Webster University
Cost Analysis for Decision Making

Chapter 16 Outline


Cost Classifications

  1. Classifications for Other Analytical Purposes
    1. Differential cost.
    2. Allocated cost.
    3. Sunk cost.
    4. Opportunity cost.

Short Run Decision Analysis

  1. Relevant Costs
  2. Irrelevant Costs
  3. The Special Pricing Decision
    1. Under conditions of Idle Capacity
    2. When Operating at Full Capacity

Capital Budgeting

  1. Investment Decision Special Considerations
    1. Time Value of Money.
    2. Involvement of Board of Directors.
  2. Cost of Capital
  3. Capital Budgeting Techniques
    1. Methods that use present value analysis.
      1. Net present value.
      2. Internal rate of return.
    2. Some analyticalconsiderations
      1. Estimates.
      2. Cash flows far into the future.
      3. Timing of cash flows within the year.
      4. Investments made over a period of time.
      5. Income tax effect of cash flows from the project.
      6. Working capital investment.
      7. Least cost projects.
    3. Methods that do not use present value analysis.
      1. Payback.
      2. Accounting rate of return.
  4. The Investment Decision
  5. Integration of Capital Budget with Operating Budgets








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