Choose And Respond To 3 Peers' Discussion Posts

Choose And Respond To 3 Peers Discussion Posts Each Response Should

Choose and respond to 3 peers' discussion posts. Each response should be a minimum of words. Discussion #1: Decision Making Chapter 7 begins by helping us understand the difference between costs and how they relate to the business. We are first taught the difference between avoidable costs and sunk costs. (Noreen, 2014) An avoidable cost is a cost that can be bypassed by choosing another option. For example the cost of stocking a bathroom with cheap toilet paper compared to expensive toilet paper. A sunk cost is a cost that cannot be undone and doesn’t have a direct input into the price you will charge for a product. ("What is a sunk cost?") For example if McDonalds were to buy 25,000 dollars of pickles for all of their stores, that cost isn’t going to change the cost they charge for a burger. The cost of the pickles has an indirect correlation to the burger. If the cost of pickles skyrockets to 50,000 dollars for all of their stores they may think to increase the price but they may choose to deal with the extra cost. The book has a good example of mentioning the car that a dealer might buy. The cost the dealer paid for the car has no direct relationship to the cost they sell it for. The cost the company paid for the car merely influences the product cost. That dealership has to pay for labor, marketing, accountants, etc. to offset the product price. The book then dived into the idea of relevant and non-relevant costs. The example earlier, the cost of toilet paper, has no direct link to the cost that a company charges for their product. Unless they are a store that sells toilet paper the cost isn’t important. You would never charge a customer more for the quality of the toilet paper in the public bathroom. These are just two examples of what owners and managers have to decide when making company decisions. They have to weigh the cost of a product, determine the relevant costs involved with that product and make a good decision on how to then sell that product. The next chapter, Chapter 8, dealt with the idea of capital expenses. (Noreen, 2014) Capital expenses are important to a company. They often improve the end product and help bring in revenue. The first idea that was brought up was screening decisions. The book illustrated this by stating that many shareholders insist on a certain return on investment value. (Noreen, 2014) An example of this could be the idea of a company buying a copier to save on toner costs. The return on investment to the company needs to save 20%, or other such set number, better than the current situation. For a company to make good decisions when it comes to capital expenses they must make a decision on what returns the most investment to their money. The second idea when it comes to capital expenses is preference decisions. (Strain) Besides the revenue return, what is the best decision for the company? Any example of this might be a pizza shop. If a company sells pizza then normally the screening decision might suggest that a pizza oven, or similar expense, might be the best investment with capital dollars as the revenue will improve. The better thing for the company to do is to fix the leaky roof, a cost that doesn’t improve the revenue but is best for the company. Although the example is imaginary, the decision is critical for a company. The company cannot lose their asset of a building by having a leaky roof. Cheaper pizza would be great, but the capital is a deeper improvement for the company. References Noreen, E. W., & Brewer, P. C. (2014). Managerial accounting for managers (3rd ed.). New York, NY: McGraw-Hill/Irwin. Strain, M. (n.d.). Chapter 14. Chapter 14 . Retrieved September 25, 2014, from What is a sunk cost?. (n.d.). What is a sunk cost? - Questions & Answers - AccountingTools . Retrieved September 25, 2014, from Discussion #2: Apple’s sunk cost decision Recent change of the iPhone 6 size is a good example of the importance decision making capacities and risks. Apple has taken its time to join the rest of the Smartphone world in providing large-screened mobile (Spence. 2014). For years the size of the iPhones were the same, but the decision to drop an old segment and add a new one was a decision that can impact the net operation income positively or negatively. Through this example we can analyze the effect of fixed cost vs. the sunk cost. Fixed cost are the would-be not actual cost of inputs which cannot be varied…However, sunk cost are revealed by a difference between the price per unit of capital services of an entrant and that of an established firm during the contract period of the output price of the entrant upon which the profitability entry is being calculated (Coldwell. 1997). Scholars say that the sunk costs are not relevant to rational decision making, however, in case of the Apple “contrary to conventional wisdom…it is rational for managers to condition behavior or sunk cost because of informational content, reputational concerns, or financial constraints (McAfee. 2010).†The rest of the Smartphone industry has gone to a large-screen mobile but Apple went to a larger-screen with researched and careful moves by fining out what works and what is not. We are told “when making decision, only incremental costs and benefits should influence your future choices, yet research shows that when you are invested in something (whether it be emotionally or financially), you find it more difficult to give up on that investment,†Apple had had invested a great deal to get a reputation of a particular shape and size and all of the sudden it changed its shape to the same size and looks as the other Smartphones; scholars say “think about how difficult it something is to terminate a project profitable just because you’ve already invested so much into it…if you are making a decision because you’ve already done or paid x, y and z, you are making a decision based on a sunk cost…rather make a decision because it will benefit or save x, y and z (Gizelle. 2014).†Apple’s design team has taken on a challenge that distorted the initial vision of the iPhone—it is interesting to know how Steven Jobs would react to this! And it was done with a sunk cost consideration which goes against the classical decision making capacities—time will show us how the sunk cost affect will effect the Apple’s sells. Reference: Spence Ewan. (2014). Apple iPhone 6 Plus Review Size Really Does Matter. Forbes. Retrieved from Coldwell Daniel. (1997). What are sunk costs? Atlantic Economic Journal. Retrieved from McAfee Preston (2010). Do sunk cost matter? Economic Inquiry. Academic One File. Retrieved from Gizelle Willows. (2014). Sunk Costs. Accountancy SA. Retrieved from Discussion #3: Make or Buy Decision According to our text the Make or Buy Decision is, “ a decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier (Noreen, Brewer, & Garrison, 2014).†This makes perfect sense nowadays when we look at producing here in the states or mass-producing these products or parts overseas. The book suggests that a company should have vertical integration set up to allow manufacturing of materials to run much more smoothly than depending on outside producers for that specific part or material that might be back logged or out of supply. Integrated companies do not stop production for any thing such as strikes, inclement weather affecting warehouses etc. Now on the other hand, the text suggest that having external suppliers can help in having a higher quality product produced for much less as there is competition out there (Noreen, Brewer & Garrison, 2014). As you guys know I am a very loyal customer to Apple products and I love reading about all the new innovations they have made, in a recent article I read about make or buy. This article lists that companies have to realize that employees are their most important assets and Apple prides itself on its great customer service and employees. As Apple is seen as a trendsetter among other companies, Apple has started manufacturing the design of microchips. This will help keep their new designs under wraps without them leaking to the public or media before hand. This new move by Apple will help them with manufacturing parts run more smoothly by doing it themselves. Apple intends to take over the competitors with their microchip making abilities to stay at the forefront of technology. From another article I read about Make or Buy decision it lists all the advantages of a company making its own parts versus buying them. It supports making materials and products in house (integration) versus buying from other suppliers. Because in house allows the company to lower cost of production, as it allows investments in other highly specialized assets. Integration keeps a company’s technology protected under their specific patterns. Makes the flow of processing to go much easier, than waiting for supplies to come in from overseas. The disadvantages of integration is he risk of strategic inflexibility and organizational problems suggest that it might be better to contract out component part manufacturing to independent suppliers. Reference: Make Or Buy Decision: Apple Researchomatic (2011). . Retrieved 25, 2014 from Make or Buy Decisions. (n.d.). Retrieved from Noreen, E.W., & Brewer, P.C. & Garrison, R, H. (2014). Managerial Accounting for Managers. New York, NY: McGraw- Hill Companies. Discussion #4: Differential Analysis The role of the manager involves planning, controlling and decision making (Noreen, Brewer, & Garrison, 2013). This can be a very cumbersome task. The bigger or more diverse the business the harder this task becomes. There are so many variables that have to be put into consideration before decisions are made. There are so many variables that have to be put into consideration before making decisions. The approach and process of how these variables and considerations are weighed to help make the right decisions or "most right" decisions is differential analysis. It is a tool that is used to help determine the most gainful way to allocate resources. (Bujaki, 2010) Two important factors that must be assessed are the cost and benefits of the different decisions' outcomes. It is first important to decide if a cost or benefit will change based on the chosen course of action and to what relative extent will have on the outcomes being considered. What is considered RELEVANT are only those costs and benefits that are dependent on the alternative courses of action. A good analysis for relevance is mandatory for proper assessment. "An avoidable cost is a cost that can be eliminated by choosing one alternative over another" (Noreen & Co, 2013). an unavoidable cost can not be eliminated by the choice of alternatives. If this cost has been incurred, it is a SUNK cost; and if it is an upcoming cost, it is a FUTURE cost. Creating a contribution format income statement with (well assessed) relevant costs and benefits is a powerful tool for making business decisions. This tool can be applied in deciding whether to buy or sell certain business items. Examples include deciding between buying new machinery as against a fairly used one. The initial cost of purchase, maintenance, depreciation and resell value have to be thoroughly evaluated before making a choice. Other scenarios where differential analysis is indispensable are the inclusion or exclusion of segments or product lines. It is relevant in deciding if special orders from customers should be honored or not. It also helps in deciding how best to utilize a business constraint and estimation of opportunity cost. In conclusion, differential analysis is a very useful business tool, but arguments have been made that it can be over-reaching when used in situations where the benefits cannot be monetized (Schwartz, 2014) References Bujaki, M. L. (2010). Cost-benefit analysis in correspondence related to building the rideau canal. Accounting History, 15(2), . Retrieved from Noreen, E., Brewer, P., & Garrison, R. (2013). Managerial Accounting for Managers 3rd Edition. New York: McGraw-Hill Irwin. Schwartz, B.(2014) Beware of economies: The perils of cost-benefit analysis. Retrieved from making-sense/beware-economics-perils-cost-benefit-analysis/ Discussion #5: Sunk Costs Decision-making requires information so that managers can use the available information to calculate options and to find what decision is best for the organization. However, information is worthless unless it is directly relevant to the issue at hand. Relevance is stated as one of the key characteristics of good management accounting information and this means that in order to determine the value of an investment or business decision, an organization must determine the relevance of costs to this decision process. Relevant costs are those which are appropriate to a specific management decision and the appropriateness of certain costs will differ depending upon the specific management decision (Collier, 2012). One of the key aspects of management decision-making is identifying all costs related to the decision and then determining which are relevant and thus must be taken into account. A relevant cost is a cost that has some bearing on the future of the company in terms of business decisions or profitability and differs among competing alternatives. In this way any relevant cost must be something that affects the future of the company in some measurable way (Collier, 2012). One cost that must be considered in decision making is the sunk cost. A sunk cost is are costs which have already occurred and therefore cannot be recovered, regardless of decisions. When looking at a sunk cost, it is a cost the company has already paid and will therefore will not change if a different decision is made. In many instances sunk costs should not affect decision-making because the company has already expensed the money for these costs and the costs cannot be recouped (Atrill & McLaney, 2009). However, sunk costs are not always considered a loss and there are times when these costs are relevant to decision making. While a sunk cost is already expensed and paid, the company can take actions to make these costs beneficial or to reduce the negative impact of costs. If a company purchases equipment and then chooses to not use the equipment for production, the sunk costs are lost and only part can be recouped if the company sells the equipment. However, if a company is choosing between production of a current product and a new product, the sunk costs can be relevant to the decision (Atrill & McLaney, 2009). If a company can make an additional $5 per-product by producing a new product, but would be required to make new equipment purchases of $100,000 then the sunk cost is relevant. If the company can continue to build its current products on the old equipment, then the sunk costs do not need to be recouped. Therefore the company would need to sell 20,000 additional units to make up for the new equipment. Atrill, P., & McLaney, E. (2009). Management Accounting for Decision Makers (6th). Boston, MA: Pearson Education. Collier, P. (2012). Accounting For Managers (4e). Hoboken, NJ: John Wiley & Sons. Discussion #6: Budgeting One of the most important decisions and planning aspects of business is the ability to forecast how the company should and might need to stay within in order to remain profitable. Budgeting is extremely important and can aid in various aspects of managerial accounting. Decisions that are made within budgeting include cost reduction, expansion, equipment selection, lease or buy or equipment replacement decisions (Noreen, 2013). Within budgeting is typically a business process in which there are senior executives or other lead department heads meet to discuss the various segments of business and expenses. They discuss the costs and the spending limits that are associated. These limits can be set for a period, monthly, quarterly or annual basis. These costs are then reviewed to decide if the costs are under, over, or on target spent (Codjia, 2010). By defining a budget within the company, this gives so much insight with the manufacturing costs, administrative costs, overhead, direct or indirect, etc. costs. This can help with any future planning for managers. With having this control being able to distinguish where changes might be necessary (Codjia, 2010). Within the budgeting process there are five different types for managerial accounting. These five types of budgeting are the master budget, operational budget, cash flow budget, financial budget, and static budget (Shpak, 2014). · A master budget is a budget that summarizes the entire year typically; it usually covers a large range of departments to keep them on the same page within a bigger organization. · The operational budget covers most of the business day to day of the business and focuses on most of the day to day activities and breaks those expenses down into smaller periods. This helps to make decisions throughout the year. · A cash flow budget is used to maintain inflows and outflows of the cash on a daily basis. This helps to predict if the cash inflows will outweigh the outflows. · The financial budget outlines a company’s capital expenditures. This type of budgeting is used generally with any mergers or public stocks. · Static budget usually contains most things budgeted do not change and most managers are told to maintain a certain amount without going over (Shpak, 2014). With budgeting there are also many advantages that are made by developing, maintaining, and using a budget within a corporation. By planning it makes managers think less of their day to day as well as forcing more long term thinking. It also gives managers the opportunity to take a step back on where they are profitable or losing cash. They can discuss funding and cash allocation. It can also help distinguish where there might be bottlenecks within the company (What are, 2014). Overall budgeting is important for all organizations as well as personally. There are various ways to plan a budget as well as the many benefits that come from planning and organizing the finances. Reference Codjia, M. (2010, July 19). The Importance of Budgetary Control in Management Accounting. Retrieved September 26, 2014, from Noreen, E. (2013). Managerial accounting for managers. Place of publication not identified: Irwin Mcgraw-Hill. Shpak, S. (2014, September 26). Five Types of Budgets in Managerial Accounting. Retrieved September 26, 2014, from What are the advantages of budgeting? - Questions & Answers - AccountingTools. (2014, September 26). Retrieved September 26, 2014, from

Paper For Above instruction

The discussion of managerial accounting and decision-making tools reveals the intricate considerations managers must make to steer their organizations effectively. Fundamental concepts such as cost behavior, sunk versus avoidable costs, capital budgeting, make-or-buy decisions, differential analysis, relevance, and budgeting processes are crucial in guiding strategic decisions and optimizing organizational performance. This paper explores these themes in detail, drawing from scholarly sources and practical examples to elucidate their application in contemporary business environments.

Understanding Costs and Their Impact on Decision-Making

At the core