COMM 305 Chapter 7: Incremental Analysis (Weygandt: Managerial Accounting, 4th Ed)
9 Mar 2017
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Accounting"s contribution to the decision-making process occurs mostly in. Steps 2 and 4: for each possible course of action, accounting provides relevant revenue and cost data. These show expected overall effect on net income: accounting prepares internal reports that review actual impact of decision. Types of incremental analysis: accept order at special price, make or buy component parts or finished products, sell products or process them further, retain or replace equipment, eliminate or retain unprofitable business segment, allocate limited resources. Accepting order might not affect normal sales of product and additional units might be manufactured without increasing plant capacity. Assumed that sales of product in other markets would not be affected by this special order. If operating at full capacity, likely that special order would be rejected (would need more room additional fixed costs and variable manufacturing costs) Decision to buy parts/services often called outsourcing.
