Horngren's Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (12th Edition)
Horngren's Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134674681
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 25, Problem 1QC
To determine

Concept Introduction:

Business decisions are a vital part of managerial accounting as they are the key to improving the performance of the business. Hence, managers take utmost care while formulating and implementing these decisions.

What should be done while making short term business decisions.

Expert Solution & Answer
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Answer to Problem 1QC

Separate the variable from the fixed costs

Explanation for correct answer:

By separating the variable from the fixed cost i.e. contribution margin approach concept, a manager can ascertain and take short term managerial decisions in an efficient manner. Thus, this approach is appropriate.

Explanation of Solution

Explanation for incorrect answer:

For taking short term business decision, traditional costing approach is not apt, since it does not include many aspects of the business. Thus, it should be ignored.

Just ascertaining the total cost will not help the manager to take the apt short-term managerial decisions as there are many aspects other than cost such as labor, production etc. thus this total cost principle is ignored.

While taking a short-term business decision, a manager should consider both quantitative and qualitative factors because considering only the quantitative factors will not help in successful decision making. Thus, this approach is ignored.

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Chapter 25 Solutions

Horngren's Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (12th Edition)

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