PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–1

This is the prescribed textbook for your course.

Available NOW at your campus bookstore!

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–2

Differential costing and

linear programming

Chapter 11

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–3

Relevant and irrelevant data

• Historical costs

• Sunk costs

• Imputed costs

• Opportunity costs

• Future costs/benefits

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–4

Quantitative and qualitative data and information

• Quantitative: data or information stored as numbers

• Qualitative: other factors that cannot be expressed effectively in numerical terms

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–5

Differential cost analysis

• Present total figures for the alternatives in columns and show a

final column for differences oror

• Present only the differences, or increments, in revenues and costs(e.g. advertising)

Analysis and presentation of data or information

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–6

Qualitative and quantitative considerations in decision

making• Accept or reject a special order

• Make or buy a product or component

• Add, modify or drop a service, product or department

• Sell now or process further

• Shut down or seasonal closure

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–7

Decisions with constraints on resources

• Constraints are limits to the availability of resources

• Where there are several constraints, linear programming techniques may be used

• Determine the contribution margin per unit of a constraint when a resource is limited

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–8

Linear programmingMaximise profits or minimise losses

First constraint 2X + 1Y < 60 000

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–9

Linear programming (cont.)

All constraints added

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–10

Linear programming (cont.)

Objective function lines plotted

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–11

Linear programming (cont.)Constraints plotted and feasible

solution space shaded

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–12

Linear programming (cont.)Minimisation

PPTs t/a Management Accounting 2e by Banks & Neish. © 2003 McGraw-Hill Australia. Slides prepared by Peter Miller

11–13

Chapter 12

Activity-based costing (ABC)

Discusses