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Int. Acc. MA LECT 5: CH 10 Relevant Info for decision making part 1: (Info…
Int. Acc. MA LECT 5: CH 10 Relevant Info for decision making part 1:
Recap lect 4
Why Estimate Costs?
Using historical costs to
predict future costs
Managers
make decisions
and need to
compare costs
among alternative actions.
Info and the decision process
Managers often have a personalised approach for deciding among different alternatives
A decision model
a standardized approach to evaluate alternatives
a standardized approach to make a choice, often involving quantitative and qualitative analysis.
--> A
standardized decision process
leads to
more efficient and objective decisions in handling repetitive tasks
--> A
standardized decision process
creates
confidence in the decision making process
A five-step sequence in the decision process
Identify the decision to be made
: Decision: Outsourcing the production of New Balance running shoes? USA vs. China vs. Turkey SLIDE 13/53
3. Choosing an alternative
Selecting the alternative which seems to be best suited
5. Evaluating performance
Review decision and consequences
Has the decision resolved the identified need?
2. Making predictions
Predicted total costs of setting up the business in China and Turkey
Predicted manufacturing costs for each unit (running shoe) in China and Turkey
What is the outcome if each of the alternatives would have been carried out to the end?
Predicted reduction in total manufacturing costs if production is moved to China or Turkey
4. Implementing the decision
Taking some positive action which begins to implement the alternative that have been chosen
Searching for a factory, relevant suppliers of raw materials, hiring a HR company to hire new factory managers and the new workforce etc.
1. Gathering information
Identifying the information that is needed: Labor costs, costs to set up the business, materials costs etc.
Identifying the best sources to gather this information: International organizations (OECD, World Bank), industry experts, consulting companies, data providers etc.
Qualitative and quantitative relevant information
Quantitative factors
are outcomes that are measured in numerical terms:
Financial
Non-financial.
Qualitative factors
are outcomes that cannot be measured in numerical terms.
One-time only example Slide 18/52