Summary Management Accounting - Incremental Analysis

Decision Making and Incremental
Analysis




contribution
accounting in step 2 and 4

·

Step 2: for each possible course of action , relevant revenue and cost data are provided
↳
show the expected overall effect on not income


Step 4 internal reports that review the actual impact of
are
prepared the decision
:
·




important information

financial related to effect company's overall profitability
-> :
revenues and costs and their on the


->
non-financial related to such factors as the effect of the decision on
employee
tumover ,
the
the overall the
environment , or
image of company

incremental
analysis approach
·

decisions involve a choice among alternative courses of action

example car
lease
leasing requires payments
purchasing requires up-front payment


·
thefinancial information relevant to the decision are the data that
vary in the future
among
the

possible alternatives

the
process used to identify the financial data that
change under alternative courses of action
·




incrementa
analysis
->


↳ both costs and revenues / costs
vary only or revenues
vary

,