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Summary Chapter 11: Decision Making and Relevant Information
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Summary of 7 pages for the course Management Accounting 2 at Hanze (Summary chapter 11)
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Decision Making and Relevant Information revenues that are not relevant are called irrelevant. It isimportant to recognize that relevant costs and relevant
A decision model is a formal method of making a choice that revenues must:
often involves both quantitative and qualitative analyses. Occur in the future: every decision deals with a manager
Management accountants analyze and present relevant data selecting a course of action based on its expected
to guide managers’ decisions. future results
Differ among the alternative courses of action: costs and
revenues that do not doffer will not matter and therefore
will have no bearing on the decision being made
Managers can ignore the revenues, direct materials,
manufacturing overhead, and marketing items because
these costs will remain the same
may be a useful basis for making informed predictions of
the expected future manufacturing labor cost, historical
costs themselves are past costs that, therefore are
irrelevant to decision making
Past costs are also called sunk costs because they are
unavoidable and cannot be changed no matter what
action is taken
Quantitative and Qualitative Relevant Information
Quantitative factors are outcomes that are measured in
numerical terms. Some quantitative factors are financial;
they can be expressed in monetary terms
o Other quantitative factors are nonfinancial; they
can be measured numerically, but they are not
expressed in monetary terms
Qualitative factors are outcomes that are difficult to
measure accurately in numerical terms. (employee
The Concept of Relevance moral)
Relevant costs are expected future costs and relevant Relevant-cost analysis generally emphasizes quantitative
revenues are expected future revenues that differ among the factors that can be expressed in financial terms.
alternative courses of action being considered. Costs and Although qualitative factors and quantitative
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