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CIMA BA2 Notes Chapter 13 - Short-term decision making
CIMA BA2 Notes Chapter 13 - Short-term decision making
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1BA 2 - Fundamentals of Management Accounting
Short-term decision making
Chapter thirteen
BA 2 Short-term decision making. Quantia Learning
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BA 2 Short-term decision making. Quantia Learning
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We will consider some short-term decision making techniques in more detail.
Some common short-term decisions which organisations make are:
• Pricing decisions for a one-off product or job.
• How many units to produce and sell – this is
known as breakeven analysis.
• Limiting factor decision – where the company
tries to operate at the maximum profitability
despite being constrained in some way.
• Make or buy decisions – where a company
decides whether to make components in house,
or buy them from an external supplier.
Decision making will involve many of the techniques that we have already looked at earlier like
relevant cosing, the calculation of contribution, and risk and uncertainty which will have an
impact on decision making.
Pricing decisions for a one-off product or job
Remember that in all decision making the rules of relevant cost apply.
When making a one-off pricing decision only relevant cash flows should be used.
BA 2 Short-term decision making. Quantia Learning
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