Accounting for Decision Making

  • Reference: CN-224-E

  • Number of pages: 15

  • Publication Date: Jun 12, 2014

  • Fecha de edición: Nov 22, 2018

  • Source: IESE (España)

  • Type of Document: Technical Note

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Description

This technical note explains how to quantify the differential impact of decision alternatives on a firm's economic value. It lays out the basic cost concepts (variable and fixed costs, direct and indirect costs, opportunity costs, breakeven point, etc.). The note also analyzes the factors that can influence the decision-making process, such as capacity utilization or possible restrictions. Finally, it compares the differential analyses in terms of cash flow vs. accounting earnings.

Learning Objective

This note can be used for any course in management accounting or cost accounting, in the section on decision analysis.

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Keywords

Accounting breakeven point capacity Cost accounting Cost-benefit Analysis Costs Decision analysis differential costs Management accounting opportunity costs