Cost allocation, master budgeting, capital decisions
Not what you're looking for?
1. Why is cost allocation imprecise?? Pick one of the different methods we can use, describe it and the pluses and minuses of that method?
2. The master budget contains three types of budgets. What do you think is the cornerstone (or most critical element) of the master budget? Discuss why?
3. Fundamental to the decision-making process is the ability to determine whether a cost is relevant to the decision. Tactical decision making consists of choosing among alternatives with an immediate or limited end in view. It should be noted, however, that short-term decisions can lead to long-term consequences. Tactical decision making consists of choosing among alternatives with an immediate or limited end in view. Tactical decisions can be short term or small scale in nature but must be made so that larger strategic objectives are served. Identify the primary qualities of revenues and costs that are relevant for decision making.
4. There are four primary methods of examining capital decisions - two are discounting methods and two are not. Please pick one of them, explain the method and the pros and cons. Remember; include a discussion on the difference between discounting and non-discounting methods.
Purchase this Solution
Solution Summary
Your discussion is 553 words and two references and discusses two pros one con of the direct method, the critical budget for master budgets, how to discern the relevant sales and costs for a decision, the two discounted methods and the two undiscounted methods, and three pros and three cons of internal rate of return (IRR).
Solution Preview
1. Cost Allocation Method pros and cons: Direct Method
I personally like the direct method for allocating costs from service departments to operating departments.
Pro: It is simple and easy to compute and explain.
Pro: It assigns costs to producing departments based on their use of resources.
Con: It ignores how service departments use indirect resources and thus may lead to overuse by service departments (it seems free to them)
2. Critical element for master budget
The critical element for the master budget is the sales forecast. That is because nearly all of the variable costs are based on the level of activity and the products needed to make the sales forecast. For instance, if the sales forecast indicates that you expect 100,000 units to sell, you need to produce enough or purchase enough to have 100,000 on hand, a store that can handle that level of merchandise, enough cashiers to check out that many ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.